Economic modelling
Informal sector changes inflation dynamics – BIS paper
Informality dampens impact of some shocks but also impairs policy transmission, authors find
Podcast: Greg Kaplan on heterogeneous-agent models
Monetary and fiscal policy are much more closely connected than many central banks would like
Book notes: Finance and philosophy, by Alex J Pollock
Readable and useful book that provides much food for thought, and should be read widely by economists and policy-makers
Researchers estimate two alternatives to DSGE model at ZLB
Dallas Fed paper finds piecewise linear version of the model is an “excellent substitute”
BoE paper outlines DSGE model of financial and real frictions
“Channels of effect” run between financial markets and labour markets, authors find
Machine learning model outperforms professional forecasters
The model may uncover new relationships in data that were previously overlooked, researcher says
Podcast: The post-crisis world
Andrew Metrick says more work may be needed to develop new models, despite recent progress
BoE paper proposes fix for flawed rate expectation estimates
Model augmented with overnight indexed swap rates performs better, author says
IMF’s Adrian calls for forecasting upgrade
Policy forecasts should do a better job of capturing endogenous risk, economist says
Agent-based models: a new frontier for macroeconomics?
Agent-based modelling is still struggling to move from sidelines to mainstream
BoE paper highlights flaws in bank modelling
Many models still treat banks as “warehouses”, authors say, with important modelling implications
Podcast: Arthur Turrell on agent-based modelling
The Bank of England economist says ABMs should complement, not replace, other models
Nordhaus and Romer win economics Nobel
Economists specialising in long-run macroeconomic modelling win 2018 Nobel Prize
BoE reveals details of nowcasting approach
Central bank explains approach to generating timely estimates of global GDP
Market power can explain financial market anomalies – BIS paper
Market power of intermediaries can explain behaviour of risk premiums, authors find
Risk-adjusted model anticipates rate changes better – paper
Monetary policy forecasts perform better when adjusted to risk, authors say
Podcast: David Hendry and John Muellbauer on empirical macro
The econometricians cast a sceptical eye over DSGE models and weigh up some alternatives
New York Fed publishes nowcasting code
Matlab code for estimating a dynamic factor model now available in online repository
Non-linear mortgage features can impact policymaking – BoE paper
Non-linear features of mortgages impact policymaking in a DSGE model, the authors find
BoE updates estimate of equilibrium interest rates
Latest data shows demographic factors have weighed heavily on real interest rates
Podcast: David Vines on how to reform the DSGE model
Oxford University’s David Vines believes the New Keynesian DSGE model is salvageable – but needs work
Fed paper builds dynamic factor model for nowcasting
Model produces “reasonably good” estimates of Ecuadorian GDP and outperforms other models
BoE paper models bank runs in general equilibrium
Daisuke Ikeda finds regulations must be comprehensive to prevent risk shifting
Good policy makes Phillips curve harder to identify – BoE’s Tenreyro
MPC member argues fears the Phillips curve has disappeared are “largely misplaced”