Computable General Equilibrium Models and Monetary Policy Advice

This paper argues that variations of extant general-equilibrium monetary models are capable of generating real-time economic forecasts comparable in accuracy to those generated under the standard Federal Reserve Board staff methodology. Specifically, the authors argue that, over the period from 1984 to 1990, forecasts generated by versions of the 'limited participation' models developed by Timothy S. Fuerst (1992) and Lawrence J. Christiano and Martin Eichenbaum (1992) compare favorably with those contained in the Board staff's 'Greenbook' briefing documents. They conclude that further development of these models holds promise for fully integrating the forecasting and policy analysis elements of the Federal Reserve's monetary policy advice process. Copyright 1995 by Ohio State University Press.