OUTPUT AND PRICE STABILITY An International Comparison
نویسندگان
چکیده
The paper examines the behavior of output and prices for 10 ditTerent countries within the context of a rational expectations model with wage contracts. The model predicts that there is a policy tradeoff between output stability and price stability, and the estimated correlations and dynamic interactions are generally consistent with the model. For each of the countries the model is fit to the data using a maximum likelihood procedure which constrains the estimates to satisfy the rational expectations hypothesis. The estimated coefficients are compared across the countries in order to determine whether the structure of the model is systematically related to economic policy, and therefore whether it is reasonable to assume that the parameters of the model are policy-invariant. It is shown how the model can be used to calculate optimal trade06 when the policy-invariance assumption is satistied.
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