Incorporating conjunctural analysis in structural models

TY - CHAP

T1 - Incorporating conjunctural analysis in structural models

AU - Giannone, Domenico

AU - Monti, Francesca

AU - Reichlin, Lucrezia

PY - 2010/1/1

Y1 - 2010/1/1

N2 - This volume celebrates the work of Michael Woodford and his many contributions to economics. One of Mike's most influential papers is the 1997 paper (co-authored with Julio Rotemberg) An optimization-based econometric framework for the evaluation of monetary policy. This paper constituted the first attempt at estimation of a small scale dynamic stochastic general equilibrium model (DSGE) in which prices are set by monopolistically competitive firms, and prices cannot be instantaneously and costlessly adjusted. Since the work of Rotemberg and Woodford, these models have become more complex and increasingly large [see Christiano, Eichenbaum and Evans (2005), Smets and Wouters (2003), and, more recently, Christoffel, Coenen and Warne (2008) and Adolfson, Laséen, Lindé and Svensson (2008)]. By explicitly taking into account forwardlooking behavior on the part of the agents, DSGEs provide a useful framework to analyze the effects of alternative policies. These models are now routinely used in many central banks, including the European Central Bank, and knowledge has been built up on their reliability, their forecasting performance and on what are the reasonable values for calibrated parameters and the setting of the priors.

AB - This volume celebrates the work of Michael Woodford and his many contributions to economics. One of Mike's most influential papers is the 1997 paper (co-authored with Julio Rotemberg) An optimization-based econometric framework for the evaluation of monetary policy. This paper constituted the first attempt at estimation of a small scale dynamic stochastic general equilibrium model (DSGE) in which prices are set by monopolistically competitive firms, and prices cannot be instantaneously and costlessly adjusted. Since the work of Rotemberg and Woodford, these models have become more complex and increasingly large [see Christiano, Eichenbaum and Evans (2005), Smets and Wouters (2003), and, more recently, Christoffel, Coenen and Warne (2008) and Adolfson, Laséen, Lindé and Svensson (2008)]. By explicitly taking into account forwardlooking behavior on the part of the agents, DSGEs provide a useful framework to analyze the effects of alternative policies. These models are now routinely used in many central banks, including the European Central Bank, and knowledge has been built up on their reliability, their forecasting performance and on what are the reasonable values for calibrated parameters and the setting of the priors.

UR - http://www.scopus.com/inward/record.url?scp=79955928378&partnerID=8YFLogxK

U2 - 10.1007/978-3-642-02953-0_4

DO - 10.1007/978-3-642-02953-0_4

M3 - Chapter

AN - SCOPUS:79955928378

SN - 9783642029523

SP - 41

EP - 57

BT - The Science and Practice of Monetary Policy Today

A2 - Wieland, Volker

PB - Springer Berlin Heidelberg

ER -