In monetary policy strategies geared towards maintaining price stability conditional and unconditional forecasts of inflation and output play an important role. In this paper we illustrate how modern sticky-price dynamic stochastic general equilibrium (DSGE) models, estimated using Bayesian...

In this paper, we derive a modification of a forward-looking Taylor rule, which integrates two variables measuring the uncertainty of inflation and GDP growth forecasts into an otherwise standard New Keynesian model. We show that certainty-equivalence in New Keynesian models is a consequence of...

The DIW is the largest and oldest economics institute in Germany and conducts research in many fields of economic analysis. In this contribution to the conference celebrating the 80th birthday of this important institution I feel stimulated to address a few analytical issues, raising questions...