Surprising Comparative Properties of Monetary Models: Results from a New Model Database
John B. Taylor,
The authors investigate the comparative properties of empirically-estimated monetary models of the U.S. economy using a new database of models designed for such investigations. They focus on three representative models due to Christiano, Eichenbaum, Evans (2005), Smets and Wouters (2007) and Taylor (1993a). Although these 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, optimized monetary policy rules differ across models and lack robustness. Model averaging offers an effective strategy for improving the robustness of policy rules.