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Commentary: Using Models for Monetary Policy Analysis

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  • Carl E. Walsh

    (University of California, Santa Cruz)

Abstract

Modern policy analysis makes extensive use of dynamic stochastic general equilibrium (DSGE) models. These models differ significantly from earlier generations of large-scale econometric models. I review what I see as major progress in the ability of economists to conduct model-based policy analysis. This progress has come through the evolution in the types of models being used and in a refinement of the types of questions asked of these models.

Suggested Citation

  • Carl E. Walsh, 2010. "Commentary: Using Models for Monetary Policy Analysis," International Journal of Central Banking, International Journal of Central Banking, vol. 6(1), pages 259-270, March.
    • Handle: RePEc:ijc:ijcjou:y:2010:q:1:a:13
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    References listed on IDEAS

    as
    1. Marvin Goodfriend & Robert G. King, 1997. "The New Neoclassical Synthesis and the Role of Monetary Policy," NBER Chapters, in: NBER Macroeconomics Annual 1997, Volume 12, pages 231-296, National Bureau of Economic Research, Inc.
    2. Canova, Fabio & Sala, Luca, 2009. "Back to square one: Identification issues in DSGE models," Journal of Monetary Economics, Elsevier, vol. 56(4), pages 431-449, May.
    3. V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2009. "New Keynesian Models: Not Yet Useful for Policy Analysis," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(1), pages 242-266, January.
    4. Ben S. Bernanke & Julio J. Rotemberg (ed.), 1997. "NBER Macroeconomics Annual 1997," MIT Press Books, The MIT Press, edition 1, volume 1, number 026252242x, December.
    5. Malin Adolfson & Stefan Laséen & Jesper Lindé & Lars E.O. Svensson, 2011. "Optimal Monetary Policy in an Operational Medium‐Sized DSGE Model," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43(7), pages 1287-1331, October.
    6. Lawrence R. Klein, 1981. "The value of models in policy analysis," Proceedings – Rural and Agricultural Conferences, Federal Reserve Bank of Kansas City, pages 1-21.
    7. Yun, Tack, 1996. "Nominal price rigidity, money supply endogeneity, and business cycles," Journal of Monetary Economics, Elsevier, vol. 37(2-3), pages 345-370, April.
    8. Frank Smets & Raf Wouters, 2003. "An Estimated Dynamic Stochastic General Equilibrium Model of the Euro Area," Journal of the European Economic Association, MIT Press, vol. 1(5), pages 1123-1175, September.
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    More about this item

    JEL classification:

    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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