In this paper we systematically evaluate how central banks respond to inflation deviations from target. We present a stylized New Keynesian model in which agents' inflation expectations are sensitive to inflation deviations from target. To (re-)establish credibility, optimal monetary policy...

The European Central Bank (ECB) and the Bank of England (BoE) are shadowed by professionals and academic economists who provide a separate policy rate recommendation in advance of the central bank's announcement. We explore differences between shadow and actual committee decisions based on an...

In this paper, we test whether public preferences for price stability (obtained from the Eurobarometer survey) are actually reflected in the interest rates set by eight central banks. We estimate augmented Taylor (1993) rules for the period 1976-1993 using the dynamic GMM estimator. We find,...