Model Comparison and Robustness: A Proposal for Policy Analysis after the Financial Crisis

The state of macroeconomic modeling and the use of macroeconomic models in policy analysis has come under heavy criticism. Critics have accused macroeconomists in academia and policy institutions of relying too much on a particular class of macroeconomic models. This paper proposes a comparative approach to macroeconomic policy analysis that is open to competing modeling paradigms. It reviews recent work on building a macroeconomic model archive and platform that makes it much easier to conduct extensive model comparisons. The paper also points towards a range of competing modeling approaches that should be the focus of a systematic model comparison exercise in the future. An example of a recent model competition in terms of forecasting performance during U.S. recessions and recoveries is discussed. The paper concludes with a review of findings regarding the effectiveness of temporary fiscal stimulus measures from a range of models and studies.