Orphanides, Athanasios (contributor); … - 2007
economy is described in terms of deviations
from these natural rates. In particular, the inflation rate is in part determined … variances of the inflation rate, the unemployment gap, and the
change in the nominal federal funds rate:
L = Var(π − π
∗
)+λV ar … the inflation rate
and the level and quasi-difference of the unemployment gap. For the present purposes, we use a standard …