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Working Paper
A guide to FRB/US: a macroeconomic model of the United States
FRB/US is a large-scale quarterly econometric model of the U.S. economy, developed to replace the MPS model. Most behavioral equations are based on specifications of optimizing behavior containing explicit expectations of firms, households, and financial markets. Although expectations are explicit, the empirical fits of the structural descriptions of macroeconomic behavior are comparable to those of reduced-form time series models. In most instances, tests do not reject overidentifying restrictions of rational expectations or the hypothesis of serially independent residuals. As modeled, ...
Working Paper
Interest rate policies for price stability
Working Paper
What's happened to the Phillips curve?
The simultaneous occurrence in the second half of the 1990s of low and falling price inflation and low unemployment appears to be at odds with the properties of a standard Phillips curve. We find this result in a model in which inflation depends on the unemployment rate, past inflation, and conventional measures of price supply shocks. We show that, in such a model, long lags of past inflation are preferred to short lags, and that with long lags, the NAIRU is estimated precisely but is unstable in the 1990s. Two alternative modifications to the standard Phillips curve restore stability. One ...
Discussion Paper
The FRB/US Model: A Tool for Macroeconomic Policy Analysis
The FRB/US model of the U.S. economy is one of several that Federal Reserve Board staff consults for forecasting and the analysis of macroeconomic issues, including both monetary and fiscal policy.
Discussion Paper
Optimal-Control Monetary Policy in the FRB/US Model
The question of how best to conduct monetary policy has been studied by economists for a long time. Over the past 25 years or so, attention has focused on systematic approaches to setting the short-term interest rate in a manner that effectively balances policymaker objectives.