by Mark Thoma, University of Oregon (Department of Economics)

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Macroeconomic Models and Monetary Policy

Posted on July 26, 2008

Paul De Grauwe is critical of the macroeconomic models used by central banks:Cherished myths fall victim to economic reality, by Paul De Grauwe, Commentary, Financial Times: ...But that is not the world of the macro economic models that are now in use in central banks. The world of these models is one of supernatural and God-like creatures for which the world has few secrets. These creatures can perfectly compute the risks they take and estimate with great precision how an oil price shock will affect their present and future production and consumption plans. They may not be able to predict ...

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central bank , economic models , fed , oil