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Macroeconomic modelling of monetary policy

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  • Klaeffling, Matt

Abstract

This paper proposes a new paradigm for the analysis of monetary policy. From an econometric point of view this new approach is just as easy to implement as reduced form analysis, but is robust to the Lucas critique. It requires no explicit prior theory and yet it encompasses all standard DSGE models. After introducing this new paradigm I study US monetary policy and look at the nature and the effect of monetary policy, discuss the transmission mechanism and the policy rule implied by the data, and perform counterfactual policy analysis. JEL Classification: C12, E52

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  • Klaeffling, Matt, 2003. "Macroeconomic modelling of monetary policy," Working Paper Series 257, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:2003257
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    File URL: https://www.ecb.europa.eu//pub/pdf/scpwps/ecbwp257.pdf
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    More about this item

    Keywords

    applied macroeconomics; DSGE models; empirical time series modelling; lucas critique; monetary policy; rational expectations; VAR models;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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