Heterogeneous agents and non-linearities rare in main models

Semi-structural models continue to be dominant choice of main forecast model at central banks

Only a handful of central banks use more advanced model elements such as heterogeneous agents and non-linearities in their main forecast models, data from the Economics Benchmarks 2024 shows.

Among 32 central banks that supplied data on the features of their main models, 12.5% include some form of heterogeneity, and 15.6% include non-linearities. Far more common are multiple channels of monetary transmission (87.5%) and inflation expectations (84.4%).

Heterogeneity could add realism to models by

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