We propose to regard the central banker as a risk manager who aims to contain inflation within pre-specified bounds. We develop formal tools of risk management that may be used to quantify and forecast the risks of failing to attain that objective. We illustrate the use of these risk measures in...

Bayesian decisions are observationally identical to decisions with judgment. Decisions with judgment test whether a judgmental decision is optimal and, in case of rejection, move to the closest boundary of the confidence interval, for a given confidence level. The resulting decisions condition...