Jordi Galí and Olivier Blanchard have called this property the'divine coincidence', and have argued that more realistic models which include additional frictions (such as frictional unemployment) imply a tradeoff between stabilizing inflation and stabilizing the output gap.
Jordi Galí and Olivier Blanchard have called this property the'divine coincidence', and have argued that in more realistic models which include additional frictions, it no longer holds. Instead, models with additional frictions (such as frictional unemployment) imply a tradeoff between stabilizing inflation and stabilizing the output gap.