Yes. But if you’re responding idiosyncratically to normal shocks so that it doesn’t seem as if you’re acting in a systematic way, that will undermine people’s beliefs that you’re following a committed rule, or rule-like behavior, that anchors their expectations. That is the key here ...

That’s a difficult question because it depends on how people learn, a mechanism that is not formally in the model itself. If people have completed their learning and know your rule and you do something quite different from your rule, does that cause them to reinterpret what you’re ...

It’s hard to say.

I think we’re creeping up that curve on the bottom left.

Well, let me give you one particular example. Suppose you had two models that differed in the degree of persistence in inflation—your Bank’s random walk model is one of those examples. If you get a shock to the output gap in that kind of model, it produces a ...

There is a literature on robust policy design in which there are a number of different ways to model this. The one that you seem to be pointing to is a rival model methodology where we put different models up and see what we get if we take the optimal ...

Let me answer your question in a slightly different way than Glenn did. I interpret your question as saying suppose private-sector agents don’t understand the rule or, even more generally, the model. In that case you might ask if there is a role that the Fed can play in ...

This is also true, if I might add just one last point, in the “policymaker perfect foresight” simulation. Without the usual penalty on interest rate volatility—remember a policymaker in that case is taking everything into account, including the kinds of things that Glenn was referring to such as the ...

Yes.

Well, perhaps. I’d point to the part of exhibits 2 and 3 where we use the FRB/US model. Now, that is a large model with lots of persistence in it; a large number of lagged states and lagged errors are at work there. Let’s say you ask ...