A New Comparative Approach to Macroeconomic Modeling and Policy Analysis

Posted: 10 Feb 2012

See all articles by Volker Wieland

Volker Wieland

University of Frankfurt

Tobias J. Cwik

Board of Governors of the Federal Reserve System

Gernot J. Müller

University of Tuebingen - Department of Economics

Sebastian Schmidt

Goethe University Frankfurt

Maik H. Wolters

Kiel Institute for the World Economy - IFW

Multiple version iconThere are 2 versions of this paper

Date Written: February 1, 2012

Abstract

In the aftermath of the global financial crisis, the state of macroeconomic modeling and the use of macroeconomic models in policy analysis has come under heavy criticism. Macroeconomists in academia and policy institutions have been blamed for relying too much on a particular class of macroeconomic models. This paper proposes a comparative approach to macroeconomic policy analysis that is open to competing modeling paradigms. Macroeconomic model comparison projects have helped produce some very influential insights such as the Taylor rule. However, they have been infrequent and costly, because they require the input of many teams of researchers and multiple meetings to obtain a limited set of comparative findings. This paper provides a new approach that enables individual researchers to conduct model comparisons easily, frequently, at low cost and on a large scale. Using this approach a model archive is built that includes many well-known empirically estimated models that may be used for quantitative analysis of monetary and fiscal stabilization policies. A computational platform is created that allows straightforward comparisons of models’ implications. Its application is illustrated by comparing different monetary and fiscal policies across selected models. Researchers can easily include new models in the data base and compare the effects of novel extensions to established benchmarks thereby fostering a comparative instead of insular approach to model development.

Keywords: macroeconomic models, model uncertainty, policy rules, robustness, monetary policy, fiscal policy, model comparison

JEL Classification: E52, E58, E62, F41

Suggested Citation

Wieland, Volker and Cwik, Tobias J. and Müller, Gernot J. and Schmidt, Sebastian and Wolters, Maik H., A New Comparative Approach to Macroeconomic Modeling and Policy Analysis (February 1, 2012). Available at SSRN: https://ssrn.com/abstract=2002818

Volker Wieland (Contact Author)

University of Frankfurt ( email )

House of Finance
Grüneburgplatz 1
Frankfurt am Main, D-60323
Germany
+49 69 798 33805 (Phone)
+49 69 798 33907 (Fax)

HOME PAGE: http://www.volkerwieland.com

Tobias J. Cwik

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue
Washington, DC 20551
United States

HOME PAGE: http://www.federalreserve.gov/econresdata/tobias-cwik.htm

Gernot J. Müller

University of Tuebingen - Department of Economics ( email )

Mohlstrasse 36
D-72074 Tuebingen, 72074
Germany

Sebastian Schmidt

Goethe University Frankfurt ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

Maik H. Wolters

Kiel Institute for the World Economy - IFW ( email )

United States

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