Consider the new Keynesian Phillips curve with indexation, (equation 7.76 Page 344 of the reading material), under the a
Posted: Wed Jul 06, 2022 6:32 pm
Consider the new Keynesian Phillips curve withindexation, (equation 7.76 Page 344 of the reading material), underthe assumptions of perfect foresight and β = 1, together with ourusual aggregate demand equation, yt =mt - pt.(a) Express pt+1 in terms of its lagged values andmt.(b) Consider an anticipated, permanent, one-time increase in m: mt= 0 for t < 0, mt = 1 for t ≥ 0. Sketch how youwould find the resulting path ofpt.