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Surprising Comparative Properties Of Monetary Models: Results From A New Model Database

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Executive Summary

In this paper the authors investigate the comparative properties of empirically-estimated monetary models of the U.S. economy. They make use of a new database of models designed for such investigations. They focus on three representative models: the Christiano, Eichenbaum, Evans (2005) model, the Smets and Wouters (2007) model, and the Taylor (1993a) model. Although the three models differ in terms of structure, estimation method, sample period, and data vintage, they find surprisingly similar economic impacts of unanticipated changes in the federal funds rate. However, the optimal monetary policy rules are different in the different models. Simple model-specific policy rules that include the lagged interest rate, inflation and current and lagged output gaps are not robust.

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