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Both from theoretical and practical viewpoints, I argue that the New Keynesian model's forward-looking IS curve should be derived by quadratic approximation. This leaves uncertainty in the basic three-equation model. After adding exogenous AR(1) processes, I examine the results by numerical...
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Using traditional monetary policy measures, Bekaert et al. (2013) show that a lax monetary policy decreases both risk … aversion and uncertainty and that positive shocks to risk aversion and uncertainty induce monetary policy changes. We extend …
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