Answered step by step
Verified Expert Solution
Question
1 Approved Answer
(8%)Given a macro-econometrics model y; = do + 1)t-1 + @2m; + &; where y, is real GDP, y is potential output, me is the
(8%)Given a macro-econometrics model y; = do + 1)t-1 + @2m; + &; where y, is real GDP, y" is potential output, me is the growth rate of monetary supply and &, is an i.i.d random noise. E() = 0 . Var(,) = 0. Assume the feedback rule in monetary policy is my = do + Myt-1 which makes steady-stateE(y) = y and minimize steady-stateVar(y). Given y =100, a, = 60, a, = 0.2, a2 = 50. Please find out the optimal do and 1, in the feedback rule
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started