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

  • Douglas Laxton
  • Andrew Berg
  • Philippe D Karam

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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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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  19. Juillard, Michel & Karam, Philippe & Laxton, Douglas & Pesenti, Paolo, 2006. "Welfare-based monetary policy rules in an estimated DSGE model of the US economy," Working Paper Series 0613, European Central Bank.
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  22. Douglas Laxton & Alasdair Scott & David Rose, 2009. "Developing a Structured Forecasting and Policy Analysis System to Support Inflation-Forecast Targeting (IFT)," IMF Working Papers 09/65, International Monetary Fund.
  23. Jorge Canales-Kriljenko & Turgut Kisinbay & Rodolfo Maino & Eric Parrado, 2006. "Setting the Operational Framework for Producing Inflation Forecasts," Working Papers Central Bank of Chile 362, Central Bank of Chile.
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  27. Benjamin Friedman, 2003. "The LM Curve: A Not-So-Fond Farewell," NBER Working Papers 10123, National Bureau of Economic Research, Inc.
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