DSGE Models & Expectations Management Policy

The FRBNY authors present and estimate a simple New Keynesian DSGE model, highlighting the core features that this basic specification shares with more elaborate versions. They then apply the estimated model to study the sources of the sudden increase in US inflation that occurred in the first half of 2004.
One important lesson derived from this exercise is that the management of expectations can be a more effective tool for stabilizing inflation than actual movements in the policy rate.
This result is consistent with the increasing use of forward guidance by central banks.
Policy Analysis Using DSGE Models: An Introduction, FRB New York, Oct 2010