Recent research suggests that commonly estimated dynamic Taylor rules augmented with a lagged interest rate imply too much predictability of interest rate changes compared with yield curve evidence. We show that this is not sufficient proof against the Taylor rule: the result could be driven by...

Volatility implied in option prices reflects the market participant's beliefs about future volatility and incorporates information that is not historical. Implied volatility is therefore widely believed to perform better as an indicator of future volatility than other forecasts based on...

Using an empirical New-Keynesian model with optimal discretionary monetary policy, we calibrate key parameters - the central bank's preference parameters; the degree of forward-looking behavior in the determination of inflation and output; and the variances of inflation and output shocks - to...