Uncertainties associated with the informational content of real-time data and the impact of policy initiatives on expectations have been offered as rationales for gradualism in monetary policy. Our objective is to assess these potential explanations quantitatively. Focusing on inflation as the...

In this article, benchmark Taylor rules are obtained as the solution to a dynamic programming problem in which interest rates are chosen to minimize the discounted sum of observed inflation and output variations. The properties of these benchmark rules are used to derive efficiency conditions...