Suppose, in the Friedman-Lucas money surprise model, that there are money demand shocks and shocks to total

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Suppose, in the Friedman-Lucas money surprise model, that there are money demand shocks and shocks to total factor productivity. Neither private sector economic agents nor the central bank can observe money demand shocks directly. Private sector economic agents cannot observe productivity shocks. However, the central bank can observe productivity shocks. How should the central bank conduct monetary policy? Discuss.

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Macroeconomics

ISBN: 978-0132991339

5th edition

Authors: Stephen d. Williamson

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