Monetary policy analysts looking for a model on which to base decisions may consider two popular approaches-the New Keynesian (NK) and the identified vector autoregression (VAR) approaches. Choosing between the two can be difficult: NK models are stylized and have simple rules while structural...

From a macroeconomic perspective, the short-term interest rate is a policy instrument under the direct control of the central bank. From a finance perspective, long rates are risk-adjusted averages of expected future short rates. Thus, as illustrated by much recent research, a joint...

Using a general-equilibrium simulation model featuring nominal rigidities and monopolistic competition in product and labor markets, this paper estimates the macroeconomic benefits and international spillovers of an increase in competition. After calibrating the model to the euro area vs. the...

I develop a model that improves upon the recent literature in open economy macroeconomics in that it lends itself more directly to empirical investigation. I solve the stationarity problem that characterizes many existing models by adopting an overlapping generations structure à la Weil (1989)....

This paper provides a selective, up-to-date survey of the recent, fast-growing literature on new open economy macroeconomics. Lucio Sarno begins with a review of the seminal paper in this literature, describing the baseline model proposed therein. He then covers a number of variants and...

An optimal control tool is described that is particularly useful for computing rules of large-scale models where users might otherwise have difficulty determining the state vector a priori and where the inversion of large, sparse matrices is involved. A small-scale demonstration is presented, as...

This paper develops a small forward-looking macroeconomic model where the Federal Reserve estimates the level of potential output in real time by running a regression on past output data. The Fed's perceived output gap is used as an input to the monetary policy rule while the true output gap...