Optimal monetary policy: Forward-looking behavior shapes economic response to inflation.
The study looked at how forward-looking behavior affects optimal monetary policy. They found that being more forward-looking in predicting future economic conditions can change how central banks should set interest rates. Specifically, being more forward-looking can make central banks less responsive to inflation but more responsive to changes in output. This means that central banks need to consider how much they look ahead when deciding on the best monetary policy to follow.