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Working Paper
Optimal Monetary and Macroprudential Policies: Gains and Pitfalls in a Model of Financial Intermediation
Kiley, Michael T.; Sim, Jae W. (2015-09-04)
We estimate a quantitative general equilibrium model with nominal rigidities and financial intermediation to examine the interaction of monetary and macroprudential stabilization policies. The estimation procedure uses credit spreads to help identify the role of financial shocks amenable to stabilization via monetary or macroprudential instruments. The estimated model implies that monetary policy should not respond strongly to the credit cycle and can only partially insulate the economy from the distortionary effects of financial frictions/shocks. A counter-cyclical macroprudential instrument ...
Finance and Economics Discussion Series , Paper 2015-78

Working Paper
Estimating Dynamic Macroeconomic Models : How Informative Are the Data?
Beltran, Daniel O.; Draper, David (2016-08)
Central banks have long used dynamic stochastic general equilibrium (DSGE) models, which are typically estimated using Bayesian techniques, to inform key policy decisions. This paper offers an empirical strategy that quantifies the information content of the data relative to that of the prior distribution. Using an off-the-shelf DSGE model applied to quarterly Euro Area data from 1970:3 to 2009:4, we show how Monte Carlo simulations can reveal parameters for which the model's structure obscures identification. By integrating out components of the likelihood function and conducting a Bayesian ...
International Finance Discussion Papers , Paper 1175

Report
Estimating Macroeconomic Models of Financial Crises: An Endogenous Regime-Switching Approach
Benigno, Gianluca; Foerster, Andrew T.; Otrok, Christopher; Rebucci, Alessandro (2020-10-01)
We estimate a workhorse dynamic stochastic general equilibrium (DSGE) model with an occasionally binding borrowing constraint. First, we propose a new speciﬁcation of the occasionally binding constraint, where the transition between the unconstrained and constrained states is a stochastic function of the leverage level and the constraint multiplier. This speciﬁcation maps into an endogenous regime-switching model. Second, we develop a general perturbation method for the solution of such a model. Third, we estimate the model with Bayesian methods to ﬁt Mexico’s business cycle and ...
Staff Reports , Paper 944

Working Paper
The St. Louis Fed DSGE Model
Faria-e-Castro, Miguel (2025-09-25)
This document contains a technical description of the dynamic stochastic general equilibrium (DSGE) model developed and maintained by the Research Division of the St. Louis Fed as one of its tools for forecasting and policy analysis. The St. Louis Fed model departs from an otherwise standard medium-scale New Keynesian DSGE model along two main dimensions: first, it allows for household heterogeneity, in the form of workers and capitalists, who have different marginal propensities to consume (MPC). Second, it explicitly models a fiscal sector endowed with multiple spending and revenue ...
Working Papers , Paper 2024-014

Working Paper
A narrative approach to a fiscal DSGE model
Drautzburg, Thorsten (2016-03-28)
This version: March 28, 2016 First version: February 2014 {{p}} Structural DSGE models are used both for analyzing policy and the sources of business cycles. Conclusions based on full structural models are, however, potentially affected by misspecification. A competing method is to use partially identified VARs based on narrative shocks. This paper asks whether both approaches agree. First, I show that, theoretically, the narrative VAR approach is valid in a class of DSGE models with Taylor-type policy rules. Second, I quantify whether the two approaches also agree empirically, that is, ...
Working Papers , Paper 16-11

Working Paper
Uncertainty Shocks, Monetary Policy and Long-Term Interest Rates
Tristani, Oreste; Amisano, Gianni (2019-04-11)
We study the relationship between monetary policy and long-term rates in a structural, general equilibrium model estimated on both macro and yields data from the United States. Regime shifts in the conditional variance of productivity shocks, or "uncertainty shocks", are an important model ingredient. First, they account for countercyclical movements in risk premia. Second, they induce changes in the demand for precautionary saving, which affects expected future real rates. Through changes in both risk-premia and expected future real rates, uncertainty shocks account for about 1/2 of the ...
Finance and Economics Discussion Series , Paper 2019-024

Working Paper
Priors and the Slope of the Phillips Curve
Jones, Callum; Kulish, Mariano; Nicolini, Juan Pablo (2021-03-17)
The slope of the Phillips curve in New Keynesian models is difficult to estimate using aggregate data. We show that in a Bayesian estimation, the priors placed on the parameters governing nominal rigidities significantly influence posterior estimates and thus inferences about the importance of nominal rigidities. Conversely, we show that priors play a negligible role in a New Keynesian model estimated using state-level data. An estimation with state-level data exploits a relatively large panel dataset and removes the influence of endogenous monetary policy.
Working Papers , Paper 778

Working Paper
Short-term Planning, Monetary Policy, and Macroeconomic Persistence
López-Salido, J. David; Gust, Christopher J.; Herbst, Edward (2020-01-08)
This paper uses aggregate data to estimate and evaluate a behavioral New Keynesian (NK) model in which households and firms plan over a finite horizon. The finite-horizon (FH) model outperforms rational expectations versions of the NK model commonly used in empirical applications as well as other behavioral NK models. The better fit of the FH model reflects that it can induce slow-moving trends in key endogenous variables which deliver substantial persistence in output and inflation dynamics. In the FH model, households and firms are forward-looking in thinking about events over their ...
Finance and Economics Discussion Series , Paper 2020-003

Working Paper
A Statistical Learning Approach to Land Valuation: Optimizing the Use of External Information
Albouy, David; Shin, Minchul (2022-11-14)
We develop a statistical learning model to estimate the value of vacant land for any parcel, regardless of improvements. Rooted in economic theory, the model optimizes how to combine common improved property sales with rare, but more informative, vacant land sales. It estimates how land values change with geography and other features and determines how much information either vacant or improved sales provide to nearby areas through spatial correlation. For most census tracts, incorporating improved sales often doubles the certainty of land value estimates.
Working Papers , Paper 22-38

Report
Unconventional Monetary Policies and Inequality
Lee, Donggyu (2024-07-01)
This paper examines the effects of unconventional monetary policies on household welfare across the wealth distribution following the Great Recession. Using a heterogeneous agent New Keynesian model, estimated with Bayesian methods, I analyze how forward guidance and quantitative easing affected inequality during this period. The findings show that while these policies boosted economic activity and benefited all households, they had non-linear distributional effects. Unconventional monetary policies reduced inequality within the bottom 90 percent by lowering unemployment but widened the ...
Staff Reports , Paper 1108

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