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Finance and Economics Discussion Series
The Finance and Economics Discussion Series logo links to FEDS home page The Evolution of Macro Models at the Federal Reserve Board
Flint Brayton, Andrew Levin, Ralph Tryon, and John C. Williams

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

Full paper (234 KB PDF) | Full paper (634 KB Postscript)

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Last update: July 16, 1997