Citation

Discussion Paper Details

Please find the details for DP11461 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: New Methods for Macro-Financial Model Comparison and Policy Analysis

Author(s): Elena Afanasyeva, Meguy Kuete, Volker Wieland and Jinhyuk Yoo

Publication Date: August 2016

Keyword(s): Macro-Finance, macroeconomic models, model comparison, Monetary policy and policy robustness

Programme Area(s): Monetary Economics and Fluctuations

Abstract: The global financial crisis and the ensuing criticism of macroeconomics have inspired researchers to explore new modeling approaches. There are many new models that deliver improved estimates of the transmission of macroeconomic policies and aim to better integrate the financial sector in business cycle analysis. Policy making institutions need to compare available models of policy transmission and evaluate the impact and interaction of policy instruments in order to design effective policy strategies. This paper reviews the literature on model comparison and presents a new approach for comparative analysis. Its computational implementation enables individual researchers to conduct systematic model comparisons and policy evaluations easily and at low cost. This approach also contributes to improving reproducibility of computational research in macroeconomic modeling. Several applications serve to illustrate the usefulness of model comparison and the new tools in the area of monetary and fiscal policy. They include an analysis of the impact of parameter shifts on the effects of fiscal policy, a comparison of monetary policy transmission across model generations and a cross-country comparison of the impact of changes in central bank rates in the United States and the euro area. Furthermore, the chapter includes a large-scale comparison of the dynamics and policy implications of different macro-financial models. The models considered account for financial accelerator effects in investment financing, credit and house price booms and a role for bank capital. A final exercise illustrates how these models can be used to assess the benefits of leaning against credit growth in monetary policy.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=11461

Bibliographic Reference

Afanasyeva, E, Kuete, M, Wieland, V and Yoo, J. 2016. 'New Methods for Macro-Financial Model Comparison and Policy Analysis'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=11461