Leith, Campbell B.; Moldovan, Ioana R.; Rossi, Raffaele - 2009
. Following Ireland (2004), we allow the
desired mark-up,
ξ
t
ξ
t
−1
, to be time varying by allowing for shocks to the mark …
and null
m
t
is an i.i.d. shock with zero mean and a vari-
10
ance of σ
2
m
. Ireland (2004) finds, in the context of a … benchmark New Keynesian model,
that mark-up shocks are more important than technology shocks in driving movements
in inflation …