Orphanides, Athanasios (contributor); … - 2005
natural rates.
In contrast, difference rules, in which the change in the interest rate is determined by the
inflation rate and … equations for the inflation rate and the unemployment
rate are given by:
pit = 0.540piet+1 +0.460pit−1 −0.341(uet −u … inflation rate, and a measure of the level of
the perceived unemployment gap, the difference between the unemployment rate and …