Discussion of Fuhrer , “ The Role of Expectations in Inflation Dynamics ”
نویسنده
چکیده
Rational expectations are at the heart of the DSGE models maintained by central banks. A key equation which governs the evolution of prices in those models is the New Keynesian Phillips (NKPC) curve, in which today‟s rate of inflation is linked to expected future inflation. Expected future inflation is in turn modeled using rational expectations, which operationally means that forecast errors are unforecastable given current information; this assumption generates the orthogonality condition used to estimate the NKPC parameters by GMM.
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