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Stochastic Refinement of The Pecorino's Optimal Inflation-Rate Model

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  • Costas Kyritsis
  • Petros Kiochos

Abstract

In this short paper with title "Stochastic Refinement of the Pecorino's Optimal Inflation-Rate model", we extend the model of Pecorino to include stochastic effects. The basic result is that under natural conditions the optimality of the model's inflation rate, remains, even if we refine it to a stochastic model. The stochastic refinement has in addition a three-fold effect: a) It makes the model mathematically more sophisticated and advanced b) It gives to it statistical and econometric foundation; it is therefore related directly to empirical measurements c) Many different cases can be considered to follow the model (up to a probability of an error) that in the previous deterministic formulation should be excluded.

Suggested Citation

  • Costas Kyritsis & Petros Kiochos, 1998. "Stochastic Refinement of The Pecorino's Optimal Inflation-Rate Model," European Research Studies Journal, European Research Studies Journal, vol. 0(4), pages 41-60, October -.
  • Handle: RePEc:ers:journl:v:i:y:1998:i:4:p:41-60
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    References listed on IDEAS

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    1. Hashem Pesaran, M., 2007. "A pair-wise approach to testing for output and growth convergence," Journal of Econometrics, Elsevier, pages 312-355.
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    More about this item

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables

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