7 12 Consider the model of Section 7 8 Suppose, however, that monetary policy responds to current inflation and output rt t y yt uMP t (a) For the case of white noise disturbances, find expressions analogous to (7 92)(7 94) What are the effects of an unfavorable inflation shock in this case (b) Des...

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7.12. Consider the model of Section 7.8. Suppose, however, that monetary policy responds to current inflation and

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7.12. Consider the model of Section 7.8. Suppose, however, that monetary policy responds to current inflation and output: rt = φππt + φy yt + uMP t .

(a) For the case of white-noise disturbances, find expressions analogous to

(7.92)–(7.94). What are the effects of an unfavorable inflation shock in this case?

(b) Describe how you would solve this model using the method of undetermined coefficients (but do not actually solve i?

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Advanced Macroeconomics

ISBN: 9780073511375

4th Edition

Authors: David Romer

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Question Posted: Nov 14, 2024 06:00 AM

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7.12. Consider the model of Section 7.8. Suppose, however, that monetary policy responds to current inflation and

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Advanced Macroeconomics

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