The Fed and its Models

Macroeconomists are generally averse to using modern mathematical and computational tools. It is not surprising that academic economists have this attitude since academics are often more focused on making simple points in simple models instead of thinking of the economy as a system. The academic system rewards cleverness and contributions to the academic issues of the day. Academics may debate matters such as how many angels can dance on the head of a pin, where there are no consequences (at least in this life) of getting the answers wrong.

The Fed, however, should be held to different standards. It has a job to do — manage the monetary policy of the US and secure the stability of its financial system. It should be using all available analytical tools it can to study the economic system of the United States, even if it means pursuing research topics that are not the latest fad in academic macroeconomics.

This website will show how that is far from the case.