Orphanides, Athanasios (contributor); … - 2007
private learning and misperceptions of natural rates call for greater policy inertia, a more aggressive response to inflation …(u − u
∗
)+νVar(Δ(i)), (8)
where Var(x) denotes the unconditional variance of variable x.
11
We assume an inflation
target of … the inflation rate, the unemployment rate, and
the interest rate, each measured at time t: Y
t
=(π
t
,u
t
,i
t
); let X
t …