Aoki, Kosuke - London School of Economics and Political Science - 2002
We describe a behavior of a central bank when its measures of current inflation and outputare subject to measurement … errors, in a framework of optimizing models with nominal pricestickiness. In our model, a central bank sets the interest rate … rateresponds to the central bank’s estimates of both current inflation and output gap, as advocatedby Taylor (1993)... …
