Coenen, Günter; Wieland, Volker - Center for Financial Studies - 2004
, has emphasized that the central bank may create expectations
of inflation by devaluing and pegging the exchange rate for … inflation and
output dynamics in the United States, the euro area and Japan surprisingly well.
As a benchmark we assume that … inflation rate, π
t
,from
the target, π
∗
, and deviations of output from potential, q
t
, as follows:
i
t
= r
∗
+ π
t
+0.5(π
t …