Macroeconomic Theory

Tying Things Together

Nathaniel Cline

Agenda

1

The “Fed” Model

2

Analyzing shocks

3

Diagnosing macro changes

The Fed Model

  • The Fed model is a framework that uses the IS curve, the MP curve, and the Phillips curve to link interest rates, the output gap, and inflation.

  • Policy makers and professional economists use the model to analyze, forecast, and tweak the economy

The Fed Model

The Fed Model

Fed Model Step 1

Fed Model Step 2

Fed Model Step 3

Fed Model Step 4

Fed Model Step 5

Fed Model Step 6

Shocks