We explore two popular approaches to empirical analysis of monetary policy: the New Keynesian and the identified vector autoregression approaches. Stylized models of private behavior coupled with simple rules describing policy behavior characterize New Keynesian work. Vector autoregressions...

Many economic applications call for simultaneous equations VAR modeling. We show that the existing importance sampler can be prohibitively inefficient for this type of models. We develop a Gibbs simulator that works for both simultaneous and recursive VAR models with a much broader range of...

The authors present a framework for computing and evaluating linear projections of macro variables conditional on hypothetical paths of monetary policy. A modest policy intervention is a change in policy that does not significantly shift agents' beliefs about policy regime and does not generate...

This paper brings together identification and forecasting in a positive econometric analysis of policy. We contend that a broad range of important policy questions is consistent with the existing policy process and is not subject to Lucas's critique. We analyze the economics of "business as...