RDP 9411: Demand Shocks, Inflation and the Business Cycle
Equation (6)
Δ
P
t
−
Δ
P
t
e
=
(
α
−
α
*
)
+
β
1
∗
(
Δ
D
t
−
Δ
D
t
e
)
+
β
2
∗
(
Δ
C
t
−
Δ
C
t
e
)
+
(
β
1
−
β
1
∗
)
Δ
D
t
+
(
β
2
−
β
2
∗
)
Δ
C
t
+
(
μ
t
−
μ
t
∗
)
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