nowhere close to removing the informal dimension of the monetary policy process,they are injecting an increased discipline to thinking and communi- cation about monetary policy. To be sure,there were some important developments in between the tra- ditional macroeconometric models and the most recent vintage.Frameworks such as Taylor(1979)and Fuhrer and Moore(1995)incorporated several im- portant features that were missing from the earlier vintage of models:(i)the Phelps/Friedman natural rate hypothesis of no long-run tradeoff between in- flation and unemployment,and(ii)rational formation of expectations.At the same time,however,the structural relations of these models typically did not evolve from individual optimization.The net effect was to make these frame- works susceptible to some of the same criticisms that led to the demise of the earlier generation of models(see,e.g.Sargent,1981).It is also relevant that over the last twenty years there have been significant advances in dynamic optimization and dynamic general equilibrium theory.To communicate with the profession at large,particularly the younger generations of scholars,it was perhaps ultimately necessary to develop applied macroeconomic models using the same tools and techniques that have become standard in modern economic analysis. Overall,our goal in this paper is to describe the main elements of this new vintage of macroeconomic models.Among other things,we describe the key differences with respect to the earlier generation of macro models.In doing so,we highlight the insights for policy that these new frameworks have to offer.In particular,we will emphasize two key implications of these new frameworks. 3nowhere close to removing the informal dimension of the monetary policy process, they are injecting an increased discipline to thinking and communi￾cation about monetary policy. To be sure, there were some important developments in between the tra￾ditional macroeconometric models and the most recent vintage. Frameworks such as Taylor (1979) and Fuhrer and Moore (1995) incorporated several im￾portant features that were missing from the earlier vintage of models: (i) the Phelps/Friedman natural rate hypothesis of no long-run tradeo§ between in- áation and unemployment, and (ii) rational formation of expectations. At the same time, however, the structural relations of these models typically did not evolve from individual optimization. The net e§ect was to make these frame￾works susceptible to some of the same criticisms that led to the demise of the earlier generation of models (see, e.g. Sargent, 1981). It is also relevant that over the last twenty years there have been signiÖcant advances in dynamic optimization and dynamic general equilibrium theory. To communicate with the profession at large, particularly the younger generations of scholars, it was perhaps ultimately necessary to develop applied macroeconomic models using the same tools and techniques that have become standard in modern economic analysis. Overall, our goal in this paper is to describe the main elements of this new vintage of macroeconomic models. Among other things, we describe the key di§erences with respect to the earlier generation of macro models. In doing so, we highlight the insights for policy that these new frameworks have to o§er. In particular, we will emphasize two key implications of these new frameworks. 3