Orphanides, Athanasios (contributor); … - 2004
the long-run response of
the nominal interest rate to a change in the inflation rate exceeds unity. We do not nd
evidence … rate and the inflation rate), and two lags of the unemployment
rate. We assume that agents estimate forecasting equations …
VAR. To x notation, let Y
t
denote the 1 3 vector consisting of the inflation rate, the unem-
ployment rate, and the …