Journal Article
A New Comparative Approach to Macroeconomic Modeling and Policy Analysis
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.
Key Words
- fiscal policy
- Fiskalpolitik
- Macroeconomic Models
- Model Comparison
- Model Uncertainty
- monetary policy
- Policy Rules
- Robustness