Optimal Monetary Policy and the Equivalency between the One-period AD-AS Model and the Forward-looking New Keynesian Model
We show how a one-period aggregate demand - aggregate supply (AD-AS) model yields equivalent expressions for inflation and output under optimal monetary policy as a forward-looking New Keynesian model. Furthermore, we analyze the advantage the AD-AS model has over the New Keynesian specification when evaluating policy efficiency.
|Date of creation:||Sep 2003|
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