Macroeconomic modeling for monetary policy evaluation

We describe some of the main features of the recent vintage macro-economic models used for monetary policy evaluation. We point to some of the key di¤erences with respect to the earlier generation of macro models, and highlight the insights for policy that these new frameworks have to o¤er. Our discussion emphasizes two key aspects of the new models: the signi\u85cant role of expectations of future policy actions in the monetary transmission mechanism, and the importance for the central bank of tracking the natural levels of output and the real interest rate. We argue that both features have important impli-cations for the conduct of monetary policy