Partly due to new research findings, partly as a result of puzzling economic developments, we constantly update our beliefs on the key economic mechanisms that are necessary to fit the data. The model should be reasonably flexible to be able to adapt to a changing economic and policy environment and to speak to current policy questions. The financial crisis is a case in point.
The macroeconomic models maintained by central banks in the early 2000s were not equipped to speak to all the questions arising in the aftermath of the crisis without further adjustments. From today’s standpoint, these adjustments are simply inescapable. We would like the model to provide a reasonable account of the dynamic effects of non-standard monetary policy measures.