Recession aversion, output and the Kydland-Prescott Barro-Gordon model
This Paper explores the relationship between the Kydland-Prescott Barro-Gordon model and models with asymmetric policy preferences. While both yield an inflation bias, recession aversion dampens the output effects of contractionary supply shocks. Some inflation may therefore reflect policy preferences.
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- Peter N. Ireland, 1998. "Does the Time-Consistency Problem Explain the Behavior of Inflation in the United States?," Boston College Working Papers in Economics 415, Boston College Department of Economics.
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