This paper develops a simple model to examine conditions under which a monetary policymaking authority is tempted to follow the market. In doing so, we explore the implications of increased market-consensus on the practice of monetary policy and show that inefficiency in policymaking is most...

When generating conditional forecasts in dynamic models it is common to impose the conditions as restrictions on future structural shocks. However, these conditional forecasts often ignore that there may be uncertainty about the future development of the restricted variables. Our paper therefore...

This paper shows that monetary policy does and should respond systematically to time variation in ex-ante uncertainty and heterogeneity in private sector's views over the business cycle. Empirical tests are initially conducted on the basis of an augmented forward-looking Taylor rule framework,...