Andrés, Javier (contributor); … - 2005
+α(y
t
−y
∗
t
), (2)
where π
t
is quarterly inflation, and the theory implies the restrictions b
1
< 1, α>0.
Baseline … particular, for a positive steady-state
inflation rate π
∗
, the New Keynesian Phillips curve implies E[y
t
−y
∗
t
]=(1/α)[−b
0 … function of the inflation rate. McCallum argues that this
result is theoretically unappealing because it implies that monetary …