Orphanides, Athanasios; Williams, John C. - Federal Reserve Bank of San Francisco - 2006
the variances of the innovations to the natural rates. Indeed, owing to the imprecision in
estimates of these variances … equilibrium solution to the structural model assuming constant and known natural
rates.
Each period, innovations are generated … from Gaussian distributions with variances re-
ported above. The innovations are serially and contemporaneously …