I show that augmenting the Taylor rule with bond yields observed at the start of the quarter significantly improves the in-sample and out-of-sample t. Moreover, the augmented rule produces lower forecast errors than those of linear and non-linear policy models

We study the convergence of European bond markets and the anchoring of inflation expectations in euro area countries using high-frequency bond yield data for France, Germany, Italy and Spain. We find that Economic and Monetary Union (EMU) has led to substantial convergence in euro area sovereign...