Andres, Javier; López-Salido, J. David; Nelson, Edward - Federal Reserve Bank of St. Louis - 2004
measure 1−θ of
producers resets their prices, while a fraction θ simply adjusts prices at the
pace of steady-state inflation … inflation from their
steady-state values, but also to nominal money growth:
ln(r
t
/r) = ρ
r
ln(r
t−1
/r)+(1−ρ
r
)ρ
π
ln(π
t
/π …,
theresponsetomoneymightberationalizedbymoney’susefulnessinfore-
casting inflation.
9
The symbol b represents percentage deviations of a variable from its steady …