Abstract: Large-scale macroeconomic models have been used at the Federal Reserve
Board for nearly thirty 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
decisionmaking. 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.
Keywords: Macroeconometric models, monetary policy, fiscal policy
Full paper (234 KB PDF)
| Full paper (634 KB Postscript)
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Last update: July 16, 1997
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