This paper provides evidence on the extent to which inflation expectations generated by a standard Christiano et al. (2005)/Smets and Wouters (2003)-type DSGE model are in line with what is observed in the data. We consider three variants of this model that differ in terms of the behavior of,...

The goal of this paper is to present the dynamic stochastic general equilibrium (DSGE) model developed and used at the Federal Reserve Bank of New York. The paper describes how the model works, how it is estimated, how it rationalizes past history, including the Great Recession, and how it is...

The goal of this paper is to present the dynamic stochastic general equilibrium (DSGE) model developed and used at the Federal Reserve Bank of New York. The paper describes how the model works, how it is estimated, how it rationalizes past history, including the Great Recession, and how it is...

This paper provides evidence on the extent to which inflation expectations generated by a standard Christiano et al. (2005)/Smets and Wouters (2003)–type DSGE model are in line with what is observed in the data. We consider three variants of this model that differ in terms of the behavior of,...

What inflation rate should central banks target? Following the work of Bils and Klenow (2004), who were the first to document the large amount of heterogeneity in the frequency of price changes across different categories of goods and services in the United States, a growing literature has...

Standard RBC models predict forecastable movements in output, consumption and hours that differ from those obtained from a VAR estimated on US data. The paper investigates whether introducing bounded rationality and learning generates business cycles properties which are empirically plausible....

We study the term structure of disagreement of professional forecasters for key macroeconomic variables. We document a novel set of facts: (i) forecasters disagree at all horizons including the very long run; (ii) the shape of the term structure of disagreement differs markedly across variables:...

We calibrate and simulate the model's response to `demand' shocks such as shifts in the marginal efficiency of investment, government spending shocks and news shocks. We show that investment-specific shocks can generate business cycle fluctuations that are broadly consistent with aggregate data.