Adam, Klaus (contributor); Billi, Roberto M. (contributor) - 2004
output and inflation depicted in figure 1 are
concave, Jensen’s inequality implies a downward bias once we allow for … thus consider the
following problem:
max
{y
t
,
t
,i
t
}
E
0
4
X
t=0
t
¡
2
t
+ y
2
t
¢
(1)
s.t.:
t
= E
t … of state variables not shown on the x-axis is set equal to zero.
19
ECB
Working Paper Series No. 380
August 2004
under …