Economic Models - Convex Optimization

182 Fabrizio Iacone and Renzo Orsi
the work). The inflation used for this graph was defined as the growth rate
of prices on the previous year: we presented it albeit, we used a different
measure in our empirical study because it is very common in the descriptive
analysis in the literature. Clearly, though, averaging the inflation in this way
induces spurious autocorrelation in the data, so in the empirical analysis we
measure inflation as the annualized growth rate of prices over each period.
We plotted this and the output gap for Germany in Fig. 2; in Figs. 3–5,
we plot the same data and the yearly real exchange rate depreciation for
Poland, Czech Republic, and Slovenia, respectively. From these figures, it
Figure 2.
Quarterly inflation and output gap, Germany.
Figure 3.
Quarterly inflation, output gap, real exchange rate depreciation, Poland.