Liu, Zheng (contributor); Phaneuf, Louis (contributor) - 2008
equilibrium conditions can be approximated by log-linearizing around a zero-inflation steady
state.4 Further, for analytical … next subsection.
4Allowing for positive steady-state inflation does not change the qualitative results (not reported).
8 …,
πt = pt − pt−1 denotes the inflation rate, ¯ct = at is the natural rate of output. The parameter
κp = λp(1 + η …