Economic modelling
Yield curve models overstate chances of US recession – ECB research
Models need to account for effects of QE asset purchases on bond premia, authors say
Fed forecasters now less optimistic on growth – San Fran Fed paper
Forecasters have eliminated “overoptimism” bias in recent years, researchers find
Paper takes ‘Hank’ approach to eurozone policy transmission
Authors identify three key dimensions of household heterogeneity
Paper models monetary policy in a ‘Hank’ framework
Authors combine micro and macro “moments”, finding investment is “crucial” to policy transmission
Research proposes ‘Monk’ model of long-term monetary transmission
Equilibrium in standard models only affected by short rates, say Garriga, Kydland and Šustek
Inside the ECB’s upgraded multi-country model
ECB-Base sets the blueprint for a new semi-structural workhorse model of the eurozone
BdF paper uses professional forecasts to improve BVAR model
Authors use “entropic tilting and soft conditioning” to incorporate survey data into model
King calls for radical shake-up to escape ‘low-growth trap’
Central bank models fail to appreciate demand-side secular stagnation
Interbank networks may be too decentralised – BoE paper
Model of how networks develop implies laissez-faire may not be optimum policy
Borio and co-authors attack concept of natural interest rate
BIS paper sets out a model in which “monetary policy hysteresis” can do lasting damage to the economy
Machine learning can help spot bank distress – BoE paper
Use of confidential data helps catch distress early, and ML can cope with complexity, authors say
Researchers use option prices to gauge ZLB risk – San Fran Fed
Chance of rates hitting zero lower bound by the end of next year is 16%, researchers find
30 years of forecasting: have central banks learned anything?
Forecasting models are constantly being upgraded, but forecast errors are still persistent
BoE paper models exchange rates with private money creation
Uncovered interest parity does a poor job of explaining exchange rates on its own, authors say
RBA sheds light on new ‘Martin’ macro model
Large-scale “macroeconometric” model designed to balance flexibility and theoretical rigour
IMF sets up new monetary policy modelling unit
Fund responds to criticism from IEO report
Proposal to axe Phillips curve triggers controversy
“One cannot just ignore an equation,” retorts Olivier Blanchard
NBER paper outlines ‘four-equation model’
Authors expand the textbook three-equation model to account for unconventional policy
BdF paper models tax evasion’s impact on sovereign default
Widespread tax evasion can undermine austerity plans imposed by donors, argue researchers
Monetary policy strongly influences income inequality – DNB paper
Central banks should not overlook income distribution effects, researchers say
RBNZ paper stresses need to understand global shocks
Analysing global shocks ‘increasingly important’ for central banks, says article
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