RDP 8708: Risk Effects Versus Monetary Effects in the Determination of Short-Term Interest Rates Equation (8)

log  b t ( 1 ) − log  b t * ( 1 ) = − 1 δ log  p t  +  1 δ log  m t  +  π t = − 1 δ ( log  p t −log  p t * ) =−  α δ ( log  p t−1  − log  p t−1 * ) +  1 δ ε t +η t = α( log  b t−1 ( 1 ) − log  b t−1 * ( 1 ) ) +  1 δ   ε t  +  η t . MathType@MTEF@5@5@+= feaagKart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbuLwBLn hiov2DGi1BTfMBaeXatLxBI9gBaerbd9wDYLwzYbItLDharqqtubsr 4rNCHbGeaGqiVu0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9 vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=x fr=xb9adbaqaaeGaciGaaiaabeqaamaabaabaaGcbaqbaeaabqGaaa aabaGaaeiBaiaab+gacaqGNbGaaGPaVlaabkgadaWgaaWcbaGaaeiD aaqabaGcdaqadaqaaiaabgdaaiaawIcacaGLPaaacaaMc8Uaaeylai aaykW7caqGSbGaae4BaiaabEgacaaMc8UaaeOyamaaDaaaleaacaqG 0baabaGaaeOkaaaakmaabmaabaGaaeymaaGaayjkaiaawMcaaaqaai aab2dacaaMc8UaaeylamaalaaabaGaaeymaaqaaiaabs7aaaGaaeiB aiaab+gacaqGNbGaaGPaVlaabchadaWgaaWcbaGaaeiDaaqabaGcca aMc8Uaae4kaiaaykW7daWcaaqaaiaabgdaaeaacaqG0oaaaiaabYga caqGVbGaae4zaiaaykW7caqGTbWaaSbaaSqaaiaabshaaeqaaOGaaG PaVlaabUcacaaMc8UaaeiWdmaaBaaaleaacaqG0baabeaaaOqaaaqa aiaab2dacaaMc8UaaeylamaalaaabaGaaeySdaqaaiaabs7aaaWaae WaaeaacaqGSbGaae4BaiaabEgacaaMc8UaaeiCamaaBaaaleaacaqG 0baabeaakiaab2cacaqGSbGaae4BaiaabEgacaaMc8UaaeiCamaaDa aaleaacaqG0baabaGaaeOkaaaaaOGaayjkaiaawMcaaaqaaaqaaiaa b2dacaqGTaGaaGPaVpaalaaabaGaaeySdaqaaiaabs7aaaWaaeWaae aacaqGSbGaae4BaiaabEgacaaMc8UaaeiCamaaBaaaleaacaqG0bGa aeylaiaabgdaaeqaaOGaaGPaVlaab2cacaaMc8UaaeiBaiaab+gaca qGNbGaaGPaVlaabchadaqhaaWcbaGaaeiDaiaab2cacaqGXaaabaGa aeOkaaaaaOGaayjkaiaawMcaaiaaykW7caqGRaGaaGPaVpaalaaaba Gaaeymaaqaaiaabs7aaaGaaeyTdmaaBaaaleaacaqG0baabeaakiaa bUcacaqG3oWaaSbaaSqaaiaabshaaeqaaaGcbaaabaGaaeypaiaayk W7caqGXoWaaeWaaeaacaqGSbGaae4BaiaabEgacaaMc8UaaeOyamaa BaaaleaacaqG0bGaaeylaiaabgdaaeqaaOWaaeWaaeaacaqGXaaaca GLOaGaayzkaaGaaGPaVlaab2cacaaMc8UaaeiBaiaab+gacaqGNbGa aGPaVlaabkgadaqhaaWcbaGaaeiDaiaab2cacaqGXaaabaGaaeOkaa aakmaabmaabaGaaeymaaGaayjkaiaawMcaaaGaayjkaiaawMcaaiaa ykW7caqGRaGaaGPaVpaalaaabaGaaeymaaqaaiaabs7aaaGaaGPaVl aabw7adaWgaaWcbaGaaeiDaaqabaGccaaMc8Uaae4kaiaaykW7caqG 3oWaaSbaaSqaaiaabshaaeqaaOGaaeOlaaaaaaa@D387@