the Board of Governors of the Federal Reserve System, jointly presented their paper on “The Performance of ForecastBased Monetary Policy Rules under Model uncertainty”. Their quantitative analysis compared forecast-based monetary policy rules with outcome

We develop an estimated model of the U.S. economy in which agents form expectations by continually updating their beliefs regarding the behavior of the economy and mone-tary policy. We explore the eects of policymakers ’ misperceptions of the natural rate of unemployment during the late 1960s and 1970s on the formation of expectations and macroeconomic outcomes. We nd that the combination of monetary policy directed at tight stabilization of unemployment near its perceived natural rate and large real-time er-rors in estimates of the natural rate uprooted heretofore quiescent inflation expectations and destabilized the economy. Had monetary policy reacted less aggressively to perceived unemployment gaps, inflation expectations would have remained anchored and the stagfla-tion of the 1970s would have been avoided. Indeed, we nd that less activist policies would have been more eective at stabilizing both inflation and unemployment. We argue that policymakers, learning from the experience of the 1970s, eschewed activist policies in fa-vor of policies that concentrated on the achievement of price stability, contributing to th