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Natural rate measures in an estimated DSGE model of the U.S. economy

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  • Rochelle M. Edge
  • Michael T. Kiley
  • Jean-Philippe Laforte

Abstract

This paper presents a monetary DSGE model of the U.S. economy. The model captures the most important production, expenditure, and nominal-contracting decisions underlying economic data while remaining sufficiently small to allow it to provide a clear interpretation of the data. We emphasize the role of model-based analyses as vehicles for storytelling by providing several examples--based around the evolution of natural rates of production and interest--of how our model can provide narratives to explain recent macroeconomic fluctuations. The stories obtained from our model are both similar to and quite different from conventional accounts.

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  • Rochelle M. Edge & Michael T. Kiley & Jean-Philippe Laforte, 2007. "Natural rate measures in an estimated DSGE model of the U.S. economy," Finance and Economics Discussion Series 2007-08, Board of Governors of the Federal Reserve System (U.S.).
  • Handle: RePEc:fip:fedgfe:2007-08
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