We resolve the non-existence pathologies of dynamic rational expectations equilibria attributed to signal extraction from endogenous variables first discovered by Futia (1981). Non-existence is overturned once it is recognized that rational agents take into account the structure of the model...

This paper estimates variants of a small-scale New Keynesian model using observations on inflation, inflation expectations and nominal interest rates. We ask whether those variables alone can tell us something about the time series properties of real marginal costs.