We build a small open economy dynamic stochastic general equilibrium model, featuring many types of nominal and real frictions that have become standard in the literature. In recent years it has become possible to estimate such models using Bayesian methods. These exercises typically involve...

I study optimal monetary policy in a simple New Keynesian model with portfolio adjustment costs. Purchases of long-term debt by the central bank (quantitative easing; ‘QE') alter the average portfolio return and hence influence aggregate demand and inflation. The central bank chooses the...

The inception of macro-prudential policy frameworks in the wake of the global financial crisis raises questions of how macro-prudential and monetary policies should be coordinated. We examine these questions through the lens of a macroeconomic model featuring nominal rigidities, housing,...

Recent results suggesting that monetary financing is more expansionary than bond financing in standard New Keynesian models rely on a duality between policy rules for the rate of money growth and the short-term bond rate, rather than a special role for money. We incorporate two features into a...

This paper studies optimal time‑consistent monetary policy in a simple New Keynesian model with long‑term nominal government debt. Fiscal policy is ‘active’, so that stabilisation of the government debt stock is a binding constraint on monetary policy. Away from the lower bound on the...

This paper develops a piecewise linear toolkit for optimal policy analysis of linear rational expectations models, subject to occasionally binding constraints on (multiple) policy instruments and other variables. Optimal policy minimises a quadratic loss function under either commitment or...

This paper outlines the properties of one of the models used at the Bank of England for analyzing the impact of energy prices on the UK economy. We build a dynamic general equilibrium model that includes a variety of channels through which energy prices affect demand and supply. On the demand...

We investigate the extent to which misperceptions about the economy can become self-reinforcing and thereby contribute to time-varying macroeconomic dynamics. To do so, we build a New Keynesian model with long-horizon expectations and dynamic predictor selection. Because agents solve...

In this paper, we compare two approaches to modelling behaviour under non-rational expectations in a benchmark New Keynesian model. The ‘Euler equation' approach modifies the equations derived under the assumption of rational expectations by replacing the rational expectations operator with an...

This paper introduces the Bank of England's new forecasting platform and provides examples of how it can be applied to practical forecasting problems. The platform consists of four components: COMPASS, a structural central organising model; a suite of models, used to fill in the gaps in the...