The Evolution of Macro Models at the Federal Reserve Board
Board of Governors of the Federal Reserve System Finance and Econ. Disc. Series #97-29
42 Pages Posted: 15 Dec 1997
Date Written: May 29, 1997
Large-scale macroeconomic models have been used at the Federal Reserve Board for nearly 30 years. After briefly reviewing the first generation of Fed models, which were based on the IS/LM/Phillips curve paradigm, the paper describes the structure and properties of a new set of models. The new models are more explicit in their treatment of expectations formation and household and firm intertemporal decision making. The incorporation of more rigorous theoretical microfoundations is accomplished while maintaining a high standard of goodness of fit. Simulations illustrate the effects of alternative assumptions about the formation of expectations and policy credibility on system properties.
JEL Classification: C50, E17, E52
Suggested Citation: Suggested Citation