Search Results
Working Paper
Temporary partial expensing in a general-equilibrium model
This paper uses a dynamic general-equilibrium model with a nominal tax system to consider the effects of temporary partial expensing allowances on investment and other macroeconomic aggregates.
Working Paper
Real-time properties of the Federal Reserve's output gap
This note considers the reliability of Federal Reserve Board staff estimates of the output gap after the mid-1990s, and examines the usefulness of these estimates for inflation forecasting. Over this period, we find that the Federal Reserve's output gap is more reliably estimated in real time than previous studies have documented for earlier periods and alternative estimation techniques. In contrast to previous work, we also find no deterioration in forecast performance when inflation projections are conditioned on real-time estimates of the output gap.
Working Paper
Time-to-build, time-to-plan, habit-persistence, and the liquidity effect
The general inability of sticky-price monetary business cycle models to generate liquidity effects has been noted in the recent literature by authors such as Christiano (1991), Christiano and Eichenbaum (1992a, 1995), King and Watson (1996), and Bernanke and Mihov (1998b). This paper develops a sticky-price monetary business cycle model that is capable of generating an empirically plausible liquidity effect. Time-to-build and time-to-plan in investment together with habit-persistence in consumption are the features of the model that allow it to produce this result.
Working Paper
How useful are estimated DSGE model forecasts?
DSGE models are a prominent tool for forecasting at central banks and the competitive forecasting performance of these models relative to alternatives--including official forecasts--has been documented. When evaluating DSGE models on an absolute basis, however, we find that the benchmark estimated medium scale DSGE model forecasts inflation and GDP growth very poorly, although statistical and judgmental forecasts forecast as poorly. Our finding is the DSGE model analogue of the literature documenting the recent poor performance of macroeconomic forecasts relative to simple naive forecasts ...
Working Paper
New Financial Stability Governance Structures and Central Banks
We evaluate the institutional frameworks developed to implement time-varying macroprudential policies in 58 countries. We focus on new financial stability committees (FSCs) that have grown dramatically in number since the global financial crisis, and their interaction with central banks, and infer countries? revealed preferences for effectiveness versus political economy considerations. Using cluster analysis, we find that only one-quarter of FSCs have both good processes and good tools to implement macroprudential actions, and that instead most FSCs have been designed to improve ...
Working Paper
Documentation of the Research and Statistics Division’s estimated DSGE model of the U.S. economy: 2006 version
This paper provides documentation for the large-scale estimated DSGE model of the U.S. economy used in Edge, Kiley, and Laforte (2007). The model represents part of an ongoing research project (the Federal Reserve Board's Estimated, Dynamic, Optimization-based--FRB/EDO--model project) in the Macroeconomic and Quantitative Studies section of the Federal Reserve Board aimed at developing a DSGE model that can be used to address practical policy questions and the model documented here is the version that was current at the end of 2006. The paper discusses the model's specification, estimated ...
Discussion Paper
Credit-to-GDP Trends and Gaps by Lender-and Credit-type
The one-sided credit-to-GDP gap -- measured as the difference between the level of private nonfinancial sector credit-to-GDP and its one-sided Hodrick-Prescott (HP) filtered trend (with λ=400,000) -- is a prominent variable in the decision-making framework proposed by the BCBS for the Basel III countercyclical capital buffer (CCyB).
Conference Paper
Welfare-maximizing monetary policy under parameter uncertainty
This paper examines welfare-maximizing monetary policy in an estimated dynamic stochastic general equilibrium model of the U.S. economy where the policymaker faces uncertainty about the true values of model parameters. Uncertainty about parameters describing preferences and technology implies not only uncertainty about the dynamics of the economy. In addition, it implies uncertainty about the model's utility-based welfare criterion and model dynamics but also uncertainty about the "natural" rate of output that the central bank should aim to achieve absent nominal rigidities and the ...
Discussion Paper
Measuring the Severity of Stress-Test Scenarios
This note presents a simple methodology for measuring the severity of stress-test scenarios, which relies on a comparison of scenario developments with historically stressful episodes--specifically, recessions and house-price retrenchments.