Writing a simple model with an output gap and inflation, we have51: 1  ∗  2  49  Deaton (1991); Carroll (1992); Carroll (1997); Carroll (2001); Kaplan, Moll and Violante (2016). See Bullard, (2010), Schmitt‐Grohé and Uribe (2014) and (2017), and Cochrane (2016). 51 See Woodford (2003) pages 245‐246.
50  15  The model could be closed by treating the rate of interest i as exogenous or adding a Taylor‐type interest rate rule.