Pesaran and Smith (2011) concluded that Dynamic Stochastic General Equilibrium (DSGE) models were sometimes a straitjacket which hampered the ability to match certain features of the data. In this chapter, the authors look at how one might assess the fit of these models using a variety of...

After 2007, countries that cut their policy interest rates close to zero turned, amongother policies, to forward guidance. We estimate a two-country model of the U.S. andCanada to quantify how unexpected changes in U.S. forward guidance affected Canada.Expansionary U.S. forward guidance shocks,...

We estimate a two-country model of the US and Canada over the post 2009 sample to study the cross-country spillovers of forward guidance shocks. To do so, we propose a method to identify forward guidance shocks during the fixed interest rate regime. US forward guidance shocks have a larger...

We propose a shadow policy interest rate based on an estimated structural model that accounts for the zero lower bound. The lower bound constraint, if expected to bind, is contractionary and increases the shadow rate compared to an unconstrained systematic policy response. By contrast, forward...