How did you spend your Labor Day? Since it's been grey this whole weekend here in N.J., I spent mine on a labor of love.
My Wonkblog colleague Ylan Mui published a post on monetary-policy games on Friday. I liked her post, but all of the simulation games were in fact pretty unrealistic. So I decided to see if I could outdo the Federal Reserve Bank of San Francisco and the European Central Bank: I built a monetary-policy simulation game from the ground-up and realistic enough to give players an accurate impression of the challenges of central banking.
And, after quite a bit of work, here is the result: FedSim. You can download it here for free from Dropbox. (It's a small file at 400 kB.) There are extensive instructions in the game itself, but basically you get to manage monetary policymaking for a decade (2013 - 2023) and the software updates a set of key macroeconomic indicators following your policy choices. The game is designed for use in the classroom -- ideally, to give economics students a fun way to learn about monetary policy.
What's in the game? Noisy measurement. Supply shocks and demand shocks. Sticky prices. Downward nominal rigidity. A short-run Phillips Curve and long-run inflation expectations. NAIRU. Monetary policy that operates with a lag. All this I've realistically calibrated to match the U.S. economy.
As for indicators, you get the unemployment rate, year-over-year headline and core PCE inflation, quarterly annualized percentage growth in real and nominal GDP, the monthly change in payroll employment, and the yield on the 10-year Treasury note.
If you've been reading the blog lately, you'll recognize that the game ties into my growing interest in modeling and quantitative analysis. I built the program in Excel with Visual Basic macros, which was a dumb choice but, hey, it's what I felt most comfortable doing.
I learned a lot of coding, for sure, in writing the program. But more importantly, having to calibrate a realistic model of the U.S. economy taught me a lot about the U.S. economy, and I'll have a post coming on that shortly.
If you play the game, take a screenshot at the end and send it to me on Twitter, by email, or in a comment on this blog post. If you're an educator looking to use this game, you're welcome to do so, and I'd love it if you could send me an email letting me know. If you're a game developer, send me an email, because there's a lot I couldn't do in Visual Basic, and I have a much bigger game in mind.