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This paper develops a simple model to examine conditions under which a monetary policy-making authority is tempted to 'follow the market'. In doing so, we explore the implications of increased market consensus on the practice of monetary policy and show that inefficiency in policymaking is most likely precisely when there is a very high consensus that economic fundamentals are weak or strong. In addition, our results also shed light on (i) why interest rates may not be high enough even when the central bank's information suggests a rise in asset prices may be due to a 'bubble' shock; (ii) why a central banker may be reluctant to adopt a loose monetary policy even when investors seem to be very pessimistic about the path of future output; and (iii) why, contrary to conventional models, we sometimes observe an upward revision of private sector's forecasts of inflation when the central bank tightens its monetary policy. The results have implications for the transparency of monetary policy. [ABSTRACT FROM AUTHOR]

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.jfineco.2005.07.006 Byline: Dan Bernhardt (a), Murillo Campello (b), Edward Kutsoati (c) Abstract: This paper develops a test for herding in forecasts by professional financial analysts that is robust to (a) correlated information amongst analysts; (b) common unforecasted industry-wide earnings shocks; (c) information arrival over the forecasting cycle; (d) the possibility that the earnings that analysts forecast differ from what the econometrician observes; and (e) systematic optimism or pessimism among analysts. We find that forecasts are biased, but that analysts do not herd. Instead, analysts 'anti-herd': Analysts systematically issue biased contrarian forecasts that overshoot the publicly-available consensus forecast in the direction of their private information. Author Affiliation: (a) Department of Economics, University of Illinois, Champaign, IL 61820, USA (b) Department of Finance, University of Illinois, Champaign, IL 61820, USA (c) Department of Economics, Tufts University, Medford, MA 02155, USA Article History: Received 22 December 2004; Revised 13 June 2005; Accepted 11 July 2005 Article Note: (footnote) [star] We are grateful to the Institutional Brokers Estimate System (I/B/E/S), a service of I/B/E/S International Inc. for providing data on analyst forecasts. We thank Long Chen, Roger Koenker, Pat O'Brien, and Selim Tepaloglu for their useful comments and suggestions, and Kofi Laing for help with our Perl program. Comments from seminar participants at Yale University, University of Rochester, University of Southern California, University of Colorado, University of Waterloo, University of Illinois, Claremont-McKenna College, University of British Columbia, Simon Fraser University, and the Federal Reserve Bank of Chicago are also appreciated. The usual disclaimer applies.

Managerial expertise and its usage in corporate culture management is evaluated.

This paper explores the use of inflation performance contracts and targets to solve bias in a monetary policy induced by an economy's debt problem by extending the contract analysis to the problem of debt.

This note responds to a comment by Sanders (2007) and clarifies certain results in Amegashie and Kutsoati (2005). [ABSTRACT FROM AUTHOR]