On Linear Quadratic Approximations
We prove the generality of the methodology proposed in Benigno and Woodford (2006). We show that, even in the presence of a distorted steady state, it is always possible and relatively simple to obtain a purely quadratic approximation to the welfare measure. We also show that, in order to do so, the timeless perspective assumption is crucial.
|Date of creation:||Jul 2006|
|Date of revision:||Jul 2006|
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Web page: https://mpra.ub.uni-muenchen.de
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