Nelson, Edward - Federal Reserve Bank of St. Louis - 2004
to use the monetary policy neglect hypothesis, which claims that the Great Inflation occurred because policymakers … interest-elastic (so excessive demand can be prevented
by monetary policy), and that u
t
has a zero mean (implying that E[u
t …
∞
b
3
i
(y
t+i
– y
t+i
*) + b
4
(u
t
– E[u
t
]), (1)
where π
t
is inflation, y
t
is log output, y
t
* is log …