The effectiveness of monetary policy depends, to a large extent, on market expectations of its future actions. In a … standard New Keynesian business cycle model with rational expectations, systematic monetary policy reduces the variance of … inflation and output gap by at least two-thirds. These stabilization benefits can be substantially smaller if expectations are …

propositions are invalid: (1) in a ZLB situation, gshaping interest rate expectations is essentially the only tool that central …

Forward guidance operates via the expectations formation process of the agents in the economy. In standard quantitative … macroeconomic models, the expectations are unobserved state variables and little scrutiny is devoted to analysing the dynamic … behaviour of these expectations. We show that the introduction of survey and financial market-based forecasts in the estimation …