Announcing a new semi-structural model being developed at the ECB, I enumerate the features that a good macroeconomic model for policy analysis should have. DSGE models do not fully fill all the criteria. That they have been evolving with lots of ad-hoc features to better fit the data, is in itself an admission of the limitations of their purw vwrsions.

This is a lecture from May 2017 on the future of monetary framework. I have evolved on some of the discussed issues. (e.g. on negative rates,) but I find the text still useful. I concluded then that the strategy of flexible inflation targeting also works for the euro area and can remain
central to any future monetary policy framework. However, one of the lessons from the crisis is the need for better mechanisms to mitigate financial stability risks with central banks being given more macroprudential tools to complement their policy toolkit. In part, the ECB’s new competences for macroprudential policy, albeit incipient, will certainly help in that direction.