Ravenna, Federico; Walsh, Carl E. - Federal Reserve Bank of San Francisco - 2009
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Blanchard and Galí (2006), like Ravenna and Walsh (2008a,b), derive a linear Phillips
curve relating unemployment and inflation … achieved under the optimal policy by responding
strongly to both inflation and unemployment.
The paper is organized as follows … rigidity, inflation stabilization can
yield a loss 25 times larger than the optimal policy. This measure though is not scaled …