A medium scale forecasting model for monetary policy

Kenneth Beauchemin and Saeed Zaman

No 1128, Working Papers (Old Series) from Federal Reserve Bank of Cleveland

Abstract: This paper presents a 16-variable Bayesian VAR forecasting model of the U.S. economy for use in a monetary policy setting. The variables that comprise the model are selected not only for their effectiveness in forecasting the primary variables of interest, but also for their relevance to the monetary policy process. In particular, the variables largely coincide with those of an augmented New-Keynesian DSGE model. We provide out-of sample forecast evaluations and illustrate the computation and use of predictive densities and fan charts. Although the reduced form model is the focus of the paper, we also provide an example of structural analysis to illustrate the macroeconomic response of a monetary policy shock.

Keywords: Forecasting; Monetary policy (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-cba, nep-for, nep-mac and nep-mon
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Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedcwp:1128

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