Economics, Econometrics and Finance
3 years ago

Uncovering hidden economic shocks leads to better policy decisions and models.

SSRN Electronic Journal
Inflation Determination and Identification: Some Positive Results
Andreas Tryphonides

Paper Summary

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The study shows that using rational expectations helps uncover hidden shocks, which is good for figuring out policy rules and testing economic models. It means we can understand how the economy works even if we don't know everything at first.