Macroeconomic modeling for monetary policy evaluation

Jordi Galí and Mark Gertler

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: We describe some of the main features of the recent vintage macroeconomic models used for monetary policy evaluation. We point to some of the key differences with respect to the earlier generation of macro models, and highlight the insights for policy that these new frameworks have to offer. Our discussion emphasizes two key aspects of the new models: the significant role of expectations of future policy actions in the monetary transmission mechanism, and the importance for the central bank of tracking of the flexible price equilibrium values of the natural levels of output and the real interest rate. We argue that both features have important implications for the conduct of monetary policy.

Keywords: New Keynesian models; microeconomic foundations; nominal rigidities; interest rate rules (search for similar items in EconPapers)
JEL-codes: E32 (search for similar items in EconPapers)
Date: 2007-06, Revised 2007-07
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (188)

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Related works:
Journal Article: Macroeconomic Modeling for Monetary Policy Evaluation (2007)
Working Paper: Macroeconomic Modeling for Monetary Policy Evaluation (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:1039

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