From f6595ec8a2acfc4e73a2d4eb41112da0ccf25545 Mon Sep 17 00:00:00 2001 From: Longye Tian Date: Fri, 19 Jul 2024 11:01:55 +1000 Subject: [PATCH 1/2] [cagan_adaptive] update suggestions Dear John, This pull request is to update the last comment from #392. In particular, this pull request add the explanation for the parameter $\alpha$ and $\lambda$. Best, Longye --- lectures/cagan_adaptive.md | 4 ++-- 1 file changed, 2 insertions(+), 2 deletions(-) diff --git a/lectures/cagan_adaptive.md b/lectures/cagan_adaptive.md index 14fe60cc..6c57162d 100644 --- a/lectures/cagan_adaptive.md +++ b/lectures/cagan_adaptive.md @@ -62,7 +62,7 @@ $$ (eq:caganmd_ad) This equation asserts that the demand for real balances -is inversely related to the public's expected rate of inflation. +is inversely related to the public's expected rate of inflation with sensitivity $\alpha$. Equating the logarithm $m_t^d$ of the demand for money to the logarithm $m_t$ of the supply of money in equation {eq}`eq:caganmd_ad` and solving for the logarithm $p_t$ of the price level gives @@ -79,7 +79,7 @@ $$ $$ (eq:eqpipi) We assume that the expected rate of inflation $\pi_t^*$ is governed -by the following adaptive expectations scheme proposed by {cite}`Friedman1956` and {cite}`Cagan`: +by the following adaptive expectations scheme proposed by {cite}`Friedman1956` and {cite}`Cagan`, where $\lambda\in [0,1]$ denote the weight on expected inflation. $$ \pi_{t+1}^* = \lambda \pi_t^* + (1 -\lambda) \pi_t From 229b6e0fe0f9b57fbe4ed1db5965168169d3d3fd Mon Sep 17 00:00:00 2001 From: Longye Tian Date: Fri, 19 Jul 2024 11:07:02 +1000 Subject: [PATCH 2/2] Update cagan_adaptive.md --- lectures/cagan_adaptive.md | 2 +- 1 file changed, 1 insertion(+), 1 deletion(-) diff --git a/lectures/cagan_adaptive.md b/lectures/cagan_adaptive.md index 6c57162d..f3d48c34 100644 --- a/lectures/cagan_adaptive.md +++ b/lectures/cagan_adaptive.md @@ -79,7 +79,7 @@ $$ $$ (eq:eqpipi) We assume that the expected rate of inflation $\pi_t^*$ is governed -by the following adaptive expectations scheme proposed by {cite}`Friedman1956` and {cite}`Cagan`, where $\lambda\in [0,1]$ denote the weight on expected inflation. +by the following adaptive expectations scheme proposed by {cite}`Friedman1956` and {cite}`Cagan`, where $\lambda\in [0,1]$ denotes the weight on expected inflation. $$ \pi_{t+1}^* = \lambda \pi_t^* + (1 -\lambda) \pi_t