Damjanovic, Tatiana; Girdenas, Sarunas; Liu, Keqing - Centre for Dynamic Macroeconomic Analysis, University … - 2015
In this paper, we consider a model where producers set their prices based on their prediction of the aggregated price level and an exogenous variable, which can be a demand or a cost-push shock. To form their expectations, they use OLS-type econometric learning with bounded memory. We show that...