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58 posts on "DSGE"
December 15, 2023

The New York Fed DSGE Model Forecast—December 2023

decorative illustration: chart and stock prices background.

This post presents an update of the economic forecasts generated by the Federal Reserve Bank of New York’s dynamic stochastic general equilibrium (DSGE) model. We describe very briefly our forecast and its change since September 2023. As usual, we wish to remind our readers that the DSGE model forecast is not an official New York Fed forecast, but only an input to the Research staff’s overall forecasting process. For more information about the model and variables discussed here, see our DSGE model Q & A.

Posted at 9:00 am in DSGE, Forecasting, Macroeconomics | Permalink
November 21, 2023

The New York Fed DSGE Model Perspective on the Lagged Effect of Monetary Policy

Decorative image: Factory workers on an assembly line with baseball caps on.

This post uses the New York Fed DSGE model to ask the question: What would have happened to interest rates, output, and inflation had the Federal Reserve been following an average inflation targeting (AIT)-type reaction function since 2021:Q2, when inflation began to rise—as opposed to keeping the federal funds rate at the zero lower bound (ZLB) until March 2022, and then raising it aggressively thereafter? We show that actual policy was more accommodative in 2021 than implied by the AIT reaction function and then more contractionary in 2022 and beyond. On net, the lagged effect of monetary policy on the level of GDP, when measured relative to the counterfactual, has been positive throughout the forecast horizon, due to the initial boost associated with keeping the fed funds rate near zero in 2021.

Posted at 7:01 am in DSGE, Monetary Policy | Permalink
September 22, 2023

The New York Fed DSGE Model Forecast— September 2023

Editor's note: We have updated the "date of forecast" row in the forecast comparison table to display the correct year (2023, not 2024). (September 25, 2023, 5:01 p.m.)
decorative photo of line and bar chart over data

This post presents an update of the economic forecasts generated by the Federal Reserve Bank of New York’s dynamic stochastic general equilibrium (DSGE) model. We describe very briefly our forecast and its change since June 2023. As usual, we wish to remind our readers that the DSGE model forecast is not an official New York Fed forecast, but only an input to the Research staff’s overall forecasting process. For more information about the model and variables discussed here, see our DSGE model Q & A.

Posted at 9:00 am in DSGE, Forecasting, Macroeconomics | Permalink
August 10, 2023

The Evolution of Short‑Run r* after the Pandemic

Decorative: U.S. dollars and surgical masks in a still life.

This post discusses the evolution of the short-run natural rate of interest, or short-run r*, over the past year and a half according to the New York Fed DSGE model, and the implications of this evolution for inflation and output projections. We show that, from the model’s perspective, short-run r* has increased notably over the past year, to some extent outpacing the large increase in the policy rate. One implication of these findings is that the drag on the economy from recent monetary policy tightening may have been limited, rationalizing why economic conditions have remained relatively buoyant so far despite the elevated level of interest rates.

Posted at 7:00 am in DSGE, Macroeconomics, Monetary Policy | Permalink
August 9, 2023

The Post‑Pandemic r*

Decorative: U.S. dollars and surgical masks in a still life.

The debate about the natural rate of interest, or r*, sometimes overlooks the point that there is an entire term structure of r* measures, with short-run estimates capturing current economic conditions and long-run estimates capturing more secular factors. The whole term structure of r* matters for policy: shorter run measures are relevant for gauging how restrictive or expansionary current policy is, while longer run measures are relevant when assessing terminal rates. This two-post series covers the evolution of both in the aftermath of the pandemic, with today’s post focusing especially on long-run measures and tomorrow’s post on short-run r*.

Posted at 7:00 am in DSGE, Forecasting, Pandemic | Permalink | Comments (1)
June 16, 2023

The New York Fed DSGE Model Forecast— June 2023

Editor's note: We have updated the "date of forecast" row in the forecast comparison table to display the correct year (2023, not 2024). (September 25, 2023, 5:04 p.m.)
decorative illustration: chart and stock prices background.

This post presents an update of the economic forecasts generated by the Federal Reserve Bank of New York’s dynamic stochastic general equilibrium (DSGE) model. We describe very briefly our forecast and its change since March 2023.

Posted at 9:00 am in DSGE, Macroeconomics | Permalink
May 31, 2023

Do Economic Crises in Europe Affect the U.S.? Some Lessons from the Past Three Decades

decorative photo: flags of U.S. and Euro

In this post we summarize the main results of our contribution to a recent e-book, “The Making of the European Monetary Union: 30 years since the ERM crisis,” on the economic and financial crises in Europe since 1992-93, and focus on the spillovers of those crises onto the United States and the global economy. We find that the answer to the question in the title of this post is a (moderate) yes.

March 24, 2023

The New York Fed DSGE Model Forecast—March 2023

decorative photo: chart and stock prices background.

This post presents an update of the economic forecasts generated by the Federal Reserve Bank of New York’s dynamic stochastic general equilibrium (DSGE) model. We describe very briefly our forecast and its change since December 2022. Note that this forecast was produced on February 27, and hence should be viewed as reflecting the state of the economy before the current banking sector turmoil.

Posted at 9:00 am in DSGE, Inflation, Macroeconomics | Permalink
December 22, 2022

Supply Chains, Student Debt, and Stablecoins—The Top 5 Liberty Street Economics Posts of 2022

“Kitchen table” issues were on the minds of our readers in 2022, though what was labeled as such was perhaps a bit broader than in the past. Supply chains—now firmly placed on the radar of Main Street—were the subject of the year’s top post by number of page views and accounted for three of the top five (we’ll consider them as one for this roundup). Student debt forgiveness and inflation were also in the news, drawing readers to our preview of various possibilities for the (subsequently announced) federal student loan forgiveness program and a quarterly update of a New York Fed economic forecast model. Posts on more technical topics were popular as well, including an update on the Federal Reserve’s balance sheet “runoff” and a discussion of stablecoins. Underscoring their broad appeal, the year’s top two posts rank among the top five in the history of Liberty Street, which dates back to 2011. Read on to see which posts resonated most with readers. 

December 16, 2022

The New York Fed DSGE Model Forecast—December 2022

This post presents an update of the economic forecasts generated by the Federal Reserve Bank of New York’s dynamic stochastic general equilibrium (DSGE) model. We describe very briefly our forecast and its change since September 2022.

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