Kaufmann, Sylvia (contributor); Kugler, Peter (contributor) - 2006
iteration under the assumption of rational expectations provides the following
solution for the price level
pt = 11+b
( 1X
i=0 … = 11+b
( 1X
i=0
b
1+b
¶i"
nt +zt +i 0 +
iX
j=1
1
ˆ
a0
jX
l=1
al¡11 +aj1st
!#
+»t
)
= nt +zt +•0 +•1st + 11+b»t; (11)
4 … = ƒZt¡1 +
k¡1X
i=1
“i¢Zt¡i +"t; (16)
where "t is a vector of white noise error terms. The rank of the matrix ƒ is a) full if …