Andrés, Javier (contributor); … - 2005
-known example is standard Calvo (1983) price setting, as represented by the
New Keynesian Phillips curve:
π
t
= b
0
+b
1
E
t
π
t+1 … particular, for a positive steady-state
inflation rate π
∗
, the New Keynesian Phillips curve implies E[y
t
−y
∗
t
]=(1/α)[−b
0 … gap as the forcing process in the New
Keynesian Phillips curve; more generally, log real marginal cost is the appropriate …