I have seen papers about monetary policy rule responds to financial slack represented by stock price gap in addition to inflation and output gap, please refer to the PDF attachment. I have three questions:
- Does monetary policy rule necessarily respond to future inflation and future output gap in addition to output gap and inflation?
- Does financial slack in monetary policy rule represent expectation about future inflation and future output gap?
- In some Asian countries like China, people said that monetary policy rule responds to credit to gdp gap in addition to output gap and inflation, does credit to GDP gap also represent expectation about future inflation and future output gap?
DSGE1.pdf (726.6 KB)
Thank you very much and look forward to hearing from you.