knowledge represents an additional distortion confronting policy, leading to greater inflation and output volatility relative to …. This permits aggressive adjustment in current interest-rate policy to stabilize inflation and output. However, unanchored … expectations are shown to raise significantly the probability of encountering the zero lower bound constraint on nominal interest …

to new uncertain observations that are less important for welfare and introduces a bias in prediction. Prudent … predictions are thus neither efficient nor unbiased. A prudent central bank adjusts the nominal interest rate more aggressively to … changes in the inflation gap, especially if the volatility of cost-push shocks is large. If the interest rate impacts the …

inflation and the difficulties of East European central banks in pursuing non-inflationary policies. The main obstacles are the …

corrects the average debt bias, inflation, which is attuned to the Union-average debt level, is more stable. …

market-based measures of expectations are similar to survey-based forecasts although the market-based measures somewhat more … accurately predict financial market responses to surprises in data. These markets also provide implied probabilities of the full … accuracy of market-generated probability density forecasts. A consistent theme is that few of the behavioural anomalies present …

of point forecasts, our proposal is comparable to alternative econometric methods and survey forecasts. In addition, it …