Today it's the turn of the New York Federal Reserve Bank's model to be introduced. Like the Bank of England, it's a DSGE model, where all the equations are derived from optimization problems. DSGE models are all built on the same key academic articles from the last 30 years.

Today it's the turn if the Bank of Italy's model. Like the Bundesbank's model it's a simultaneous equation model with a long-run derived from theory. Also like the Bundesbank's model, it features energy inputs and a financial sector.

Today it's time for the macro model of the Bundesbank. In contrast to the Bank of England, they've chosen a semi-structural (equation-by-equation) model as their key model. This allows more flexibility in describing the economy than the theoretically rigid DSGE model of the Bank of England.

After referring last time to the Pagan report, the first model we will talk about is the COMPASS model of the Bank of England. For the central model around which they organize their forecasting process, the BofE has gone for a highly stylized DSGE model.

Before we look at some actual models, it's worth asking why different institutions use different types of model. Surely if one type of model best captures the relationships between variables in a modern economy, all institutions will end up picking that type?

This account will introduce and discuss microeconomic models in use at various institutions around the world. These tools have an important influence over policies that affect all our lives and the modeling choices behind each model can have important consequences.