Focus on the dynamic transitions.
Recall the three equations system. From the IS-LM model, we derive the Dynamic IS Equation here.
The Monetary Policy rule, is the Taylor Principle, or Taylor Rule.
- We derive NKPC from firms. Intuition is “Inflation” is forward looking. Firm anticipate future price changes. Higher , it means less the firms could change the price,
逻辑需要补充
Calibration
One way to calibrate is to estimate it, run the regression and estimate the slope of the Phillips curve. The other approach, use the fact from other parameters (reasonable).