Recent empirical research shows that a reasonable characterization of federal-funds-rate targeting behavior is that the change in the target rate depends on the maturity structure of interest rates and exhibits little dependence on lagged target rates. See, for example, Cochrane and Piazzesi...

Identification problems arise naturally in forward-looking models when agents observe more than economists. We illustrate the problem in several New Keynesian and macro-finance models in which the Taylor rule includes a shock unseen by economists. We show that identification of the rule's...