Structural Models and Monetary Policy Analysis I want to focus on three contributions of models to the monetary policy process: as an input to the forecast process; as a vehicle for analyzing alternative scenarios; and a vehicle for developing a strategy for implementing monetary policy that disciplines the juggling of multiple objectives and ensures a bridge from short-run policy to long-run objectives. 1.
The forecast context for monetary policy decisions Because monetary policy has the ability to adjust quickly to changing economic conditions and because lags in the response to monetary policy make it important that monetary policy be forward-looking, monetary policy is very much influenced both by incoming data and by forecasts of spending and price developments. Forecasts are central to monetary policy setting.