Comment on Michael Woodford , Imperfect Common Knowledge and the E ¤ ects of Monetary Policy ¤
نویسنده
چکیده
The general idea of this paper, Woodford [1], is to abandon the Phelps-Lucas model for the Phelps-Woodford model. We know that the Phelps-Lucas idea is that real e¤ects of nominal disturbances arise because of assumed imperfect information about these disturbances. But the standard Lucas formulation of this results in too little persistence of these real e¤ects. Mike suggests a more elaborate interpretation of the Phelps idea, such that prices depend on “higherorder” estimates of nominal disturbances. If these higher-order estimates are updated more slowly than ...rst-order estimates, more persistent real e¤ects arise. Mike shows that this idea can generate impulse responses of in‡ation and output with considerable persistence. The model has a continuum of ...rms in monopolistic competition. Each ...rm i will in equilibrium set its (log) price pt(i) according to
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