Svensson(1994). We interpret the instantaneous forward rate as the expectations for the overnight rate prevailing at each point … derive a measure of expectations for Central Banks interventions. On this basis we can assess the predictability of monetary …

and employment are below their full employment levels. Three alternative expectations hypotheses are used - 'adaptive …', 'monetarist' and 'pure rational' - all of which ensure no expectations errors in the steady state. All three lead to different … steady states, with contrasting output responses to the rate of monetary growth, despite constraining expectations to be …