Practical Model-Based Monetary Policy Analysis : A How-To Guide

This paper provides a how-to guide to model-based forecasting and monetary policy analysis. It describes a simple structural model, along the lines of those in use in a number of central banks. This workhorse model consists of an aggregate demand (or IS) curve, a price-setting (or Phillips) curve, a version of the uncovered interest parity condition, and a monetary policy reaction function. The paper discusses how to parameterize the model and use it for forecasting and policy analysis, illustrating with an application to Canada. It also introduces a set of useful software tools for conducting a model-consistent forecast.
Publication date: March 2006
ISBN: 9781451863413
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Inflation , Forecasting and Simulation , Model construction and estimation , computational techniques , inflation , aggregate demand , monetary fund , real interest rate

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