McGough, Bruce (contributor); … - 2004
the
natural substitute for the short rate as the instrument of monetary policy, because a long
rate is closely related to … (the percent deviation of output from its natural rate),
…t is the in ation rate, it is the short-term interest rate, and … ation is unity, and that the natural rate of interest is zero. The innovations et and ut
are assumed to be white noise.3
We …