Is the macroeconomy too complex and uncertain to be represented by a single model?
Why is it interesting? Recognizing that the macroeconomy is too complex and uncertain to be represented by a single model, this comparison of 11 models, with a focus on the Euro Area, confirms that an optimized policy rule specific to a model would induce greater macroeconomic fluctuations. A generalized policy rule derived by averaging over the 11 models is more robust. What to do on the MMB? Models: EA_AWM05; G7_TAY93, EA_CW05fm, EA_CW05ta, G3_CW03; EA_SW03, EACZ_GEM03, EA_SR07, EA_QUEST3; EA_CKL09, EA_GNSS10 Policy Rules: Gerdesmeier & Roffia (2004) Shocks: Monetary Policy Shock Variables: Inflation, Output What is interesting? The 11 models range from a traditional Keynesian model (EA_AWM05), the first wave of New Keynesian models (G7_TAY93, EA_CW05fm, EA_CW05ta, G3_CW03), modern NK models (EA_SW03, EACZ_GEM03, EA_SR07, EA_QUEST3) to NK models with frictions (EA_CKL09, EA_GNSS10). Since a generalized policy rule is introduced to all the 11 models, diff...