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- = E b atj CB t + 1 (1 ) V 1 V 1 +V 1 + (1 ) (1 )2 V 1 V 1 +V 1 2 + (1 ) (1 )2 t + (1 ) + (1 ) (1 )2 2 + (1 ) (1 )2 V 1 V 1 + V 1 E ;tj CB t + E tj CB t ! + pt 1 = E b atj CB t + 1 (1 ) + (1 ) (1 )2 2 + (1 ) (1 )2 V 1 + (1 ) V 1 V 1 + V 1 ! t + (1 ) + (1 ) (1 )2 2 + (1 ) (1 )2 V 1 V 1 + V 1 E ;tj CB t + E tj CB t ! + pt 1: A.6 Monetary Policy: Part 2 We start by characterizing the information extraction by the central bank.34 The central bank’ s observation equation is the Phillips curve (equation (49)). The …ltering problem is to optimally attribute ‡ uctuations in the aggregate price pt (excluding the eects of t and b yt) to the unobservable variables ( ;t, b at, t). Following Amador and Weill (2010, 2012) and Veldkamp (2011), we can compute the posterior mean of the unobservable variables in the following way. We can interpret equation (49) as representing the signals on ;t, b at and t.
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- Speech at the Federal Reserve Bank of Kansas City Economic Symposium, Jackson Hole, Wyoming, August 29, 2015.
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