Dennis, Richard; Leitemo, Kai; Söderström, Ulf - Federal Reserve Bank of San Francisco - 2006
bank’s preferences for
stabilizing the output gap, yt yft , and the interest rate relative to in ation.
We set the central … bank preferences for output gap and interest rate stabilization to
= 0:5 and = 0:05, respectively. The concern for … covariances are distorted.
Figures 1{3 show the responses of in ation, the output gap, real marginal costs, and
the nominal …