RDP 2006-11: Component-smoothed Inflation: Estimating the Persistent Component of Inflation in Real Time
Equation (2)
P
i
t
*
=
(
P
i
t
−
1
*
+
μ
i
t
−
1
)
+
α
i
t
(
P
i
t
−
(
P
i
t
−
1
*
+
μ
i
t
−
1
)
)
μ
i
t
=
μ
i
t
−
1
+
γ
(
Δ
P
i
t
*
−
μ
i
t
−
1
)
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