Working Paper

The Evolution of Macro Models at the Federal Reserve Board


Abstract: Large-scale macroeconomic models have been used at the Federal Reserve Board for nearly thirty years. After briefly reviewing the first generation of Fed models, which were based on the IS/LM/Phillips curve paradigm, the paper describes the structure and properties of a new set of models. The new models are more explicit in their treatment of expectations formation and household and firm intertemporal decisionmaking. The incorporation of more rigorous theoretical microfoundations is accomplished while maintaining a high standard of goodness of fit. Simulations illustrate the effects of alternative assumptions about the formation of expectations and policy credibility on system properties.

Keywords: Macroeconometric models; monetary policy; fiscal policy;

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Bibliographic Information

Provider: Board of Governors of the Federal Reserve System (U.S.)

Part of Series: Finance and Economics Discussion Series

Number: 1997-29

Pages: 42 pages