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last three decades. Are lagged dependent variables - traditionally interpreted as proxies for inflation expectations - just … expectations in the inflation process; if indeed inflation is a global phenomenon, the task of controlling inflation expectations … inflation expectations. Are the actions of central banks nothing more than a sideshow? …
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We combine an estimated monetary policy rule featuring time-varying trend inflation and stochastic coefficients with a medium scale New Keynesian framework calibrated on the U.S. economy. We find the impact of variations in trend inflation on the likelihood of equilibrium determinacy to be both...
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