We consider the impact of pessimism on monetary policy within a model with backward looking expectations and persistence in the dynamics of output and inflation. We show that pessimistic monetary authorities move their instruments to hedge against the worst economic shocks. With respect to their...

Using a standard monetary policy model, we study how foreign exchange intervention may be used to condition the perception among economic agents of the objective of the policymaker. Foreign exchange intervention does not bring about a systematic policy again, such as an increase in the...