Dynamic stochastic general equilibrium (DSGE)
Agent-based models come of age
Central banks are increasingly modelling the economy as a complex system
Economics Benchmarks 2024 report – making models work
The benchmarks this year include more granular details on key model design features
Stiglitz offers alternatives to standard theories of economic fluctuations
Nobel prize winner argues that endogenously driven variations are key to understanding economies
Heterogeneous agents and non-linearities rare in main models
Semi-structural models continue to be dominant choice of main forecast model at central banks
NBER paper reviews ‘state of the art’ climate modelling
Recent breakthroughs have increased accuracy and computational efficiency of IAMs
North Macedonia develops new DSGE model
Analytical tool to supplement existing models built in conjunction with CNB and IMF
Simpler models can capture dynamics of Hank framework – NBER paper
Heterogeneity can be “irrelevant” to determining output in some situations, authors find
Bank of Canada maps path to ‘fourth-generation’ models
Officials plan to create new workhorse model backed by variants focusing on key topics
Machine learning pushes frontier of forecasting
AI techniques are starting to transform central banks’ statistical modelling. They could soon revolutionise structural models as well
What economists learned from Covid-19
A rush of work on ‘epi-macro’ yielded breakthroughs and then faded. Will there be lasting benefits?
Christopher Sims on modelling the inflation surge
Unprecedented series of shocks creates major challenges for central bank forecasters, the Nobel Prize-winning economist tells Daniel Hinge
Joseph Stiglitz on the challenge of fixing macroeconomics
The Nobel Prize-winning economist discusses the flaws in mainstream models and how to repair them, whether central banks went wrong in 2021, and what to do – or not to do – about inflation
Book notes: Cogs and monsters, by Diane Coyle
Coyle brings much-needed nuance to the debate over the shortcomings of economics
Lifetime achievement: Stanley Fischer
Fischer has had a profound impact on monetary economics and central banking during his prolific career
Reciprocity can curb macro-prudential ‘leakages’ – BIS paper
But gains can be small, which may explain limited use of reciprocity to date, authors say
Economics Benchmarks 2021 report – making sense of the modern economy
Covid-19 coloured central banks’ views on the governance of their economics function in the past year, from research topics to forecasting, data, publications and more
Advanced economies draw on wider range of models
DSGE models and newer techniques more common at advanced economy central banks
Nearly 40% of central banks have financial sector in main forecast model
Semi-structural models remain favoured option for producing key forecasts
Mervyn King attacks central bank theories of inflation
Expectations are “too fragile” to serve as an anchor for inflation, former BoE governor says
New York Fed opens new research centre
Marco Del Negro will lead work on research methods and issues in macroeconomics
BIS paper outlines model of managed floats
Framework captures financial frictions while being simpler than other models, authors say