(Possibly) Hidden Shocks and the Driving Process for Inflation
نویسنده
چکیده
where Stock and Watson (call them SW1) impose the restriction that λ = 1, on the assumption that there is a random walk component in trend inflation, with an estimate of θ of at least 0.5, apparently with an upward trend in recent data. In data from 1980 onwards estimates of λ are significantly below unity, but not quantitatively far below, such that Stock and Watson’s (fixed coeffi cient) IMA representation implies an almost identical autocorrelation function for πt to an unrestricted ARMA(1,1).1
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