We estimate the ECB's monetary policy reaction function by using real time Eurosystem/ECB staff macroeconomic projection data, which are presented to the ECB's Governing Council when it assesses the monetary policy stance in the euro area. Alternative specifications of the reaction function...

Expectations about the future are central for determination of current macroeconomic outcomes and the formulation of monetary policy. Recent literature has explored ways for supplementing the benchmark of rational expectations with explicit models of expectations formation that rely on...