Dynamic stochastic general equilibrium (DSGE)
Economists race to merge epidemiology and macro
Promising results are emerging, but workable forecasts may be some way off
BIS paper finds little evidence of ‘liquidity trap’
Monetary policy remains effective even very close to the lower bound, economists find
Paper models monetary policy in a ‘Hank’ framework
Authors combine micro and macro “moments”, finding investment is “crucial” to policy transmission
Macroeconomics is not broken
The discipline has moved beyond the neoclassical synthesis. Critics should too
Inside the ECB’s upgraded multi-country model
ECB-Base sets the blueprint for a new semi-structural workhorse model of the eurozone
30 years of forecasting: have central banks learned anything?
Forecasting models are constantly being upgraded, but forecast errors are still persistent. What more can central banks do?
RBA sheds light on new ‘Martin’ macro model
Large-scale “macroeconometric” model designed to balance flexibility and theoretical rigour
Proposal to axe Phillips curve triggers controversy
“One cannot just ignore an equation,” retorts Olivier Blanchard
NBER paper outlines ‘four-equation model’
Authors expand the textbook three-equation model to account for unconventional monetary policy; extra policy tool is necessary to overcome credit shocks
BIS says theory behind EME policy must catch up with ‘reality’
Situation is similar to the adoption of inflation targeting in the early 1990s, says BIS annual report
‘Uncertainty shocks’ can do long-term harm – BoE paper
Authors outline a general equilibrium model to show uncertainty can have long-run effects
Informal sector changes inflation dynamics – BIS paper
Informality dampens impact of some shocks but also impairs policy transmission, authors find
Book notes: Finance and philosophy, by Alex J Pollock
A readable and useful book that provides much food for thought, and should be read widely by economists and policy-makers
Book notes: Where economics went wrong, by David Colander and Craig Freedman
Chicago economics’ gladiatorial debating style has cost the discipline dearly, the authors argue
Economics in central banking: Greg Kaplan, Benjamin Moll and Gianluca Violante
Authors’ paper, ‘Monetary policy according to Hank’, boosts the realism of core economic models, delivering important insights into inequality and the transmission of monetary policy
Book notes: Macroprudential policy and practice, edited by Paul Mizen, Margarita Rubio and Philip Turner
An important overview of the current state of thinking about macro-prudential policy, but uncertainties remain about the current allocation of financial stability responsibilities
BoE paper outlines DSGE model of financial and real frictions
“Channels of effect” run between financial markets and labour markets, authors find
Podcast: The post-crisis world
Andrew Metrick says central banks have changed dramatically since 2008, but more work may be needed to develop new models
Agent-based models: a new frontier for macroeconomics?
Agent-based modelling is opening up new possibilities for economics, but the discipline is still struggling to move from the sidelines to the mainstream
BoE paper highlights flaws in bank modelling
Many models still treat banks as “warehouses”, authors say, with important modelling implications
Podcast: Arthur Turrell on agent-based modelling
The Bank of England economist says ABMs should complement, not replace, other models
Podcast: David Hendry and John Muellbauer on empirical macro
The econometricians cast a sceptical eye over DSGE models and weigh up some alternatives
Non-linear mortgage features can impact policymaking – BoE paper
Non-linear features of mortgages impact policymaking in a DSGE model, the authors find
Podcast: David Vines on how to reform the DSGE model
Oxford University’s David Vines believes the New Keynesian DSGE model is salvageable – but needs some serious work