Equilibrium Growth, Inflation, and Bond Yields - Duke University's ...

std(! y)
std(E[! c])
E[r d −r f ]
Figure 8: Varying Intensity of Inflation Stabilization
2.5
2.4
2.3
2.2
2.1
1 1.5 2
"
#
2.5 3
0.6
0.58
0.56
0.54
0.52
1 1.5 2
"
#
2.5 3
4.5
4
3.5
3
1 1.5 2
"
#
2.5 3
std(#)
std(E[#])
E[y (20) −y (1) ]
2
1.5
1
0.5
1 1.5 2
"
#
2.5 3
2
1.5
1
0.5
1 1.5 2
"
#
2.5 3
2
1.5
1
0.5
0
1 1.5 2
"
#
2.5 3
This figure plots the impact of varying the policy parameter ρπ on output growth volatility, inflation volatility,
volatility of expected consumption growth, volatility of expected inflation, equity premium, and average nominal
yield spread in the benchmark growth model. Values on y-axis are in annualized percentage units.
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