Working Paper: NBER ID: w16074
Authors: Lawrence J. Christiano; Mathias Trabandt; Karl Walentin
Abstract: Monetary DSGE models are widely used because they fit the data well and they can be used to address important monetary policy questions. We provide a selective review of these developments. Policy analysis with DSGE models requires using data to assign numerical values to model parameters. The chapter describes and implements Bayesian moment matching and impulse response matching procedures for this purpose.
Keywords: DSGE models; monetary policy; Taylor principle; output gap; unemployment
JEL Codes: E2; E3; E5; J6
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| rise in nominal interest rate (E43) | destabilize the economy (F65) |
| rise in inflation (E31) | greater-than-one rise in nominal interest rates (E43) |
| greater-than-one rise in nominal interest rates (E43) | stabilize inflation expectations (E31) |
| rise in nominal interest rates (E43) | increase inflation (E31) |
| tighter monetary policy (E52) | inefficient boom in output and asset prices (E32) |
| unemployment rates (J64) | valuable information about resource allocation efficiency (D61) |