Practical Model-Based Monetary Policy Analysis
Author | : Philippe D Karam |
Publisher | : International Monetary Fund |
Total Pages | : 74 |
Release | : 2006-03 |
ISBN-10 | : UCSD:31822034981399 |
ISBN-13 | : |
Rating | : 4/5 (99 Downloads) |
Book excerpt: 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.