My final remark on model and methodological challenges concerns the fact that most macroeconomic models today are solved and estimated in linear form, essentially relying on the linear stochastic difference approach used in macroeconomics since the 1950s. Again, this feature has merits and limitations: linear modelling techniques are powerful and easy to handle and can be scaled to larger and more complete models.
But there are a number of essential policy questions that simply cannot be addressed within linear frameworks. One prominent question relates to the emergence of time-varying risk premia that are apparently influencing the behaviour of the long-end of the yield curve.