Journal Article

A New Comparative Approach to Macroeconomic Modeling and Policy Analysis

Journal of Economic Behavior and Organization

In the aftermath of the global financial crisis, the state of macroeconomicmodeling and the use

of macroeconomic models in policy analysis has come under heavy criticism. Macroeconomists

in academia and policy institutions have been blamed for relying too much on a particular class

of macroeconomic models. This paper proposes a comparative approach to macroeconomic policy

analysis that is open to competing modeling paradigms. Macroeconomic model comparison

projects have helped produce some very influential insights such as the Taylor rule. However,

they have been infrequent and costly, because they require the input of many teams of researchers

and multiple meetings to obtain a limited set of comparative findings. This paper provides a new

approach that enables individual researchers to conduct model comparisons easily, frequently, at

low cost and on a large scale. Using this approach a model archive is built that includes many

well-known empirically estimated models that may be used for quantitative analysis of monetary

and fiscal stabilization policies. A computational platform is created that allows straightforward

comparisons of models’ implications. Its application is illustrated by comparing different monetary

and fiscal policies across selected models. Researchers can easily include new models in the

data base and compare the effects of novel extensions to established benchmarks thereby fostering

a comparative instead of insular approach to model development.

Authors

Volker Wieland
Tobias Cwik
Gernot Müller
Sebastian Schmidt