Although policymakers and commentators have repeatedly stressed the impact of uncertainty about the true state of the economy on the setting of interest rates, the academic literature has largely ignored this issue. This paper provides a theoretical analysis of how uncertainty about the true...

The Opportunistic Approach to Monetary Policy is an influential but untested model of optimal monetary policy. We provide the first tests of the model, using US data from 1983Q1-2004Q1. Our results support the Opportunistic Approach. We find that policymakers respond to the gap between inflation...

We estimate a flexible non-linear monetary policy rule for the UK to examine the response of policymakers to the real exchange rate. We have three main findings. First, policymakers respond to real exchange rate misalignment rather than to the real exchange rate itself. Second, policymakers...

This paper analyses the impact of uncertainty on monetary policy rules in the US since the early 1980s. Extending the Taylor rule to allow the response of interest rates to inflation and the output gap to depend on uncertainty, we find evidence that the predictions of the theoretical literature...

This paper analyzes how the determinants of two entrepreneurs’ choice whether to conduct product innovation R&D projects alone, or in a cross license agreement, or in a research joint venture depend on the intrinsic nature of the R&D projects. Results show that in fundamental research -- which...

This paper provides empirical evidence on the response of monetary policymakers to uncertainty. Using data for the UK since the introduction of inflation targets in October 1992, we find that the impact of inflation on interest rates is lower when inflation is more uncertain and is larger when...