9.6. Unemployment and inflation
The second model is concerning an important issue of Macroeconomics, which is the trade-off between the unemployment rate and inflation, studied thoroughly by the economist William Phillips.
The CoV can help to understand what the best combination of inflation and unemployment over time would be.
The model proposed here is the same as proposed in Alpha Chiang, op.cit., Chapter 2, which is itself an adapted model of the original one proposed by Taylor,
3
where the planning horizon has been changed from ∞ to a finite T.
Table 9.5-1
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