For example, Canzoneri, Cumby, and Diba consider further complications of the sticky-price, sticky-wage model, including capital investment and habit formation in consumption, while Benigno and Woodford explore the case in which the steady state of the model is not Pareto optimal, as assumed by EHL.
This progressive analysis of the implications of alternative assumptions is part of what Thomas Kuhn called “normal science.” The insights from these types of modeling efforts are already informing policy analysis at the Board, and their influence will only grow as they become more detailed and realistic. A second important area, one that will always be central to monetary policy, is macro forecasting.