Deltahedron: /* See also */ Spectrum of a sentence

2014-09-08T21:15:44Z

← Older revision		Revision as of 23:15, 8 September 2014
Line 1:		Line 1:
	~~The '''monetary policy reaction function'''~~ (~~MPRF~~) ~~is the upward-sloping relationship between the [[inflation rate]] and the [[unemployment rate]]. When the [[inflation rate]] rises~~, ~~a [[central bank]] wishing to fight [[inflation]] will raise [[interest rates]] to reduce output and thus increase the [[unemployment rate]].~~		Aircraft Preservation Engineer (Mechanical ) Sulit from Bramalea, has hobbies and interests including musical instruments, ganhando dinheiro na internet and polo. Unearthed some fascinating spots after spending 2 days at Maritime Greenwich.<br><br>Feel free to surf to my site ... [http://www.comoganhardinheiro101.com/inicio/ ganhe dinheiro]

	~~The MPRF is a function of the [[Taylor rule]], the [[IS curve]], and [[Okun's law]].{{cn\|date=August 2013}}~~

	~~The MPRF~~ has ~~the equation:~~

	~~<math>u = u_{0} + \Phi(\pi - \pi_{t})</math>~~

	Where <math>\Phi</math> is a parameter that tells us how much unemployment rises when the [[central bank]] raises the [[real interest rate]] <math>r</math> because it thinks that [[inflation]] is too high and needs to be reduced.

	~~The Slope of the MPRF is: <math>\frac{1}{\Phi}</math>~~

	The MPRF is used hand in hand with the [[Phillips Curve]] to determine the effects of [[economic policy]]. This framework illustrates [[Underemployment equilibrium\|equilibrium]] levels of the [[unemployment rate]] and ~~the [[inflation rate]] in a [[sticky-price model]].~~

	~~== Alternative ==~~
	~~Alternatively~~, ~~in [[Ben Bernanke]]~~ and ~~[[Robert H~~. Frank]]'s ''Principles of Economics'' textbook, the MPRF is a model of the Fed's interest rate behavior. In its most simple form, the MPRF is an upward-sloping relationship between the real interest rate and the inflation rate. ~~The following is an example of an MPRF from the third edition of the textbook{{full\|date=August 2013}}:~~

	~~r = r* + g(π - π*)~~

	~~r = target real interest rate (or actual real interest rate)~~<br />
	~~r* = long-run target for the real interest rate~~<br />
	~~g = constant term (or the slope of the MPRF)<br />~~
	~~π = actual inflation rate<br />~~
	~~π* = long-run target for the inflation rate~~

	~~Of course, the MPRF above is just one example, and there are other examples (such as the [[Taylor rule]]) that are more complex~~.

	~~The following graph shows the simple MPRF with the real interest rate on the Y-axis and the inflation rate on the X-axis~~.~~<ref>from the~~ [http://~~econblog~~.~~aplia~~.com/~~2007/10/monetary-policy-reaction-function.html?showComments=false Aplia Econ Blog]<~~/~~ref> Assume a 3% actual and long-run target inflation rate.~~

	~~== References ==~~
	~~{{Reflist}}~~

	~~[[Category:Macroeconomics]]~~
	~~[[Category:Monetary economics]~~]

en>RDBury: rm cat, theory is not a theorem

2011-10-12T18:55:36Z

rm cat, theory is not a theorem

New page

The '''monetary policy reaction function''' (MPRF) is the upward-sloping relationship between the [[inflation rate]] and the [[unemployment rate]]. When the [[inflation rate]] rises, a [[central bank]] wishing to fight [[inflation]] will raise [[interest rates]] to reduce output and thus increase the [[unemployment rate]].

The MPRF is a function of the [[Taylor rule]], the [[IS curve]], and [[Okun's law]].{{cn|date=August 2013}}

The MPRF has the equation:

<math>u = u_{0} + \Phi(\pi - \pi_{t})</math>

Where <math>\Phi</math> is a parameter that tells us how much unemployment rises when the [[central bank]] raises the [[real interest rate]] <math>r</math> because it thinks that [[inflation]] is too high and needs to be reduced.

The Slope of the MPRF is: <math>\frac{1}{\Phi}</math>

The MPRF is used hand in hand with the [[Phillips Curve]] to determine the effects of [[economic policy]]. This framework illustrates [[Underemployment equilibrium|equilibrium]] levels of the [[unemployment rate]] and the [[inflation rate]] in a [[sticky-price model]].

== Alternative ==
Alternatively, in [[Ben Bernanke]] and [[Robert H. Frank]]'s ''Principles of Economics'' textbook, the MPRF is a model of the Fed's interest rate behavior. In its most simple form, the MPRF is an upward-sloping relationship between the real interest rate and the inflation rate. The following is an example of an MPRF from the third edition of the textbook{{full|date=August 2013}}:

r = r* + g(π - π*)

r = target real interest rate (or actual real interest rate)<br />
r* = long-run target for the real interest rate<br />
g = constant term (or the slope of the MPRF)<br />
π = actual inflation rate<br />
π* = long-run target for the inflation rate

Of course, the MPRF above is just one example, and there are other examples (such as the [[Taylor rule]]) that are more complex.

The following graph shows the simple MPRF with the real interest rate on the Y-axis and the inflation rate on the X-axis.<ref>from the [http://econblog.aplia.com/2007/10/monetary-policy-reaction-function.html?showComments=false Aplia Econ Blog]</ref> Assume a 3% actual and long-run target inflation rate.

== References ==
{{Reflist}}

[[Category:Macroeconomics]]
[[Category:Monetary economics]]

Spectrum of a theory - Revision history

Deltahedron: /* See also */ Spectrum of a sentence

en>RDBury: rm cat, theory is not a theorem