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Bayesian New Neoclassical Synthesis (NNS) Models: Modern Tools for Central Banks

Author

Listed:
  • Frank Smets

    (European Central Bank,)

  • Rafael Wouters

    (National Bank of Belgium,)

Abstract

This paper discusses the advantages of Bayesian New Neoclassical Synthesis models as tools for monetary policy analysis and forecasting. The combination of a sound, micro founded structure with a good probabilistic description of the observed data makes those models suitable for investigating the structural sources of business cycle fluctuations, for analysing optimal monetary policy responses to those developments and for making economic projections conditional on various policy assumptions. The paper gives two examples of such analysis. (JEL: E40, E50, C11) Copyright (c) 2005 The European Economic Association.

Suggested Citation

  • Frank Smets & Rafael Wouters, 2005. "Bayesian New Neoclassical Synthesis (NNS) Models: Modern Tools for Central Banks," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 422-433, 04/05.
    • Handle: RePEc:tpr:jeurec:v:3:y:2005:i:2-3:p:422-433
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    References listed on IDEAS

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    Cited by:

    1. Ozge Senay, 2008. "Interest Rate Rules And Welfare In Open Economies," Scottish Journal of Political Economy, Scottish Economic Society, vol. 55(3), pages 300-329, July.
    2. Galí, Jordi, 2011. "Are central banks' projections meaningful?," Journal of Monetary Economics, Elsevier, vol. 58(6), pages 537-550.
    3. Katuala, Hénock M., 2021. "Frictions financières et Dynamique macroéconomique : Examen des régularités cycliques," Dynare Working Papers 66, CEPREMAP.
    4. Jean-Olivier Hairault & Thepthida Sopraseuth, 2008. "Fluctuations internationales et dynamique du taux de change," Economie & Prévision, La Documentation Française, vol. 0(2), pages 65-91.
    5. Daly, Hounaida & Smida, Mounir, 2013. "La coordination des politiques monétaire et budgétaire: Aperçu théorique [Coordination of monetary and fiscal policies: Theoretical Overview]," MPRA Paper 48020, University Library of Munich, Germany.
    6. Wing Leong Teo, 2009. "Estimated Dynamic Stochastic General Equilibrium Model Of The Taiwanese Economy," Pacific Economic Review, Wiley Blackwell, vol. 14(2), pages 194-231, May.
    7. Pelin Ilbas, 2012. "Revealing the preferences of the US Federal Reserve," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 27(3), pages 440-473, April.
    8. Meenagh, David & Minford, Patrick & Oyekola, Olayinka, 2015. "Energy Business Cycles," Cardiff Economics Working Papers E2015/19, Cardiff University, Cardiff Business School, Economics Section.
    9. Negro, Marco Del & Schorfheide, Frank, 2013. "DSGE Model-Based Forecasting," Handbook of Economic Forecasting, in: G. Elliott & C. Granger & A. Timmermann (ed.), Handbook of Economic Forecasting, edition 1, volume 2, chapter 0, pages 57-140, Elsevier.
    10. Daly, Hounaida & Smida, Mounir, 2013. "Interaction entre politique monétaire et politique budgétaire:Cas de la Grèce [Fiscal and Monetary Policy Interactions : The Greece Case]," MPRA Paper 45931, University Library of Munich, Germany.
    11. Carlos C. Bautista, 2009. "An examination of Philippine monetary policy rules," UP School of Economics Discussion Papers 200912, University of the Philippines School of Economics.
    12. Grant Spencer & Ozer Karagedikli, 2006. "Modelling for monetary policy: the New Zealand experience," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 69, pages 1-8., June.
    13. Michel Juillard & Florian Pelgrin, 2007. "Computing Optimal Policy in a Timeless-Perspective: An Application to a Small-Open Economy," Staff Working Papers 07-32, Bank of Canada.
    14. Daly, Hounaida & Smida, Mounir, 2014. "Fiscal Theory of Price Level," MPRA Paper 60142, University Library of Munich, Germany.
    15. Frank Smets & Kai Christoffel & Günter Coenen & Roberto Motto & Massimo Rostagno, 2010. "DSGE models and their use at the ECB," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 1(1), pages 51-65, March.
    16. Pelin Ilbas, 2008. "Estimation of monetary policy preferences in a forward-looking model : a Bayesian approach," Working Paper Research 129, National Bank of Belgium.
    17. Meenagh, David & Minford, Patrick & Oyekola, Olayinka, 2015. "Oil Prices and the Dynamics of Output and Real Exchange Rate," Cardiff Economics Working Papers E2015/18, Cardiff University, Cardiff Business School, Economics Section.

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    More about this item

    JEL classification:

    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General

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