Meaning of divine coincidence | Babel Free
Definitions
The property of a (New Keynesian) macroeconomic model that stabilizing inflation and stabilizing the (relevant) output gap is equivalent.
Examples
“In [the standard new Keynesian framework], stabilizing inflation is equivalent to stabilizing the welfare-relevant output gap. In this paper, we argue⟳ that this property of the new Keynesian framework, which we call⟳ the divine coincidence, is due to a special feature of the model⟳ […]”
“Because credit shocks appear⟳ in the Phillips curve, the so-called divine coincidence […] does not hold⟳, and it is not possible to achieve⟳ the global minimum of the loss function with just one policy instrument.”
CEFR level
B2
Upper Intermediate
This word is part of the CEFR B2 vocabulary — upper intermediate level.
This word is part of the CEFR B2 vocabulary — upper intermediate level.
See also
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