Dittmar, Robert; Gavin, William T.; Kydland, Finn E. - Federal Reserve Bank of St. Louis - 2004
If the central bank follows an interest rate rule, then inflation is likely to be persistence, even when prices are … inflation are determined by the evolution of the spread between the real interest rate and the central bank’s target. Inflation … from trend. This paper shows that a flexible-price general equilibrium business cycle model with money and a central bank …