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A Practical Model-Based Approach to Monetary Policy Analysis: Overview

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Author Info

  • Douglas Laxton
  • Andrew Berg
  • Philippe D Karam

Abstract

This paper motivates and describes an approach to forecasting and monetary policy analysis based on the use of a simple structural macroeconomic model, along the lines of those in use in a number of central banks. It contrasts this approach with financial programming and its emphasis on monetary aggregates, as well as with more econometrically driven analyses. It presents illustrative results from an application to Canada. A companion paper provides a more detailed how-to guide and introduces a set of tools designed to facilitate this approach.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 06/80.

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Length: 45
Date of creation: 01 Mar 2006
Date of revision:
Handle: RePEc:imf:imfwpa:06/80

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Related research

Keywords: Monetary aggregates; Forecasting models; Economic models; inflation; monetary policy; monetary fund; aggregate demand; central bank; inflation targeting; real interest rate; monetary economics; monetary aggregate; inflation target; nominal interest rate; monetary policy reaction function; monetary transmission; monetary transmission mechanism; money demand; rational expectations; inflation equation; optimal monetary policy; foreign exchange; inflation-targeting; monetary policy rules; inflation rate; monetary policy transmission mechanism; price level; monetary authorities; adaptive expectations; monetary policy rule; monetary policy regime; real interest rates; monetary policy reaction functions; national bank; low inflation; real output; monetary policy instrument; increase in interest rates; rate of inflation; monetary regimes; high inflation; low levels of inflation; loose monetary policy; inflationary expectations; monetary transmission mechanisms; inflation targeting framework; measure of inflation; inflation process; monetary framework; money balances; inflationary impact; monetary policy regimes; transmission of monetary policy; macroeconomic analysis; monetary aggregate targets; monetary theory; inflation response; monetary accounts; inflation ? equation;

This paper has been announced in the following NEP Reports:

References

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