scholarly journals Constructing a Small-Region DSGE Model

2013 ◽  
Vol 2013 ◽  
pp. 1-9
Author(s):  
Kenichi Tamegawa
Keyword(s):  
General Equilibrium ◽  
Interest Rates ◽  
Numerical Simulations ◽  
National Economy ◽  
Regional Economy ◽  
Small Region ◽  
Dynamic Stochastic General Equilibrium ◽  
Dsge Models ◽  
Dsge Model ◽  
Dynamic Stochastic

This paper constructs a tractable dynamic stochastic general equilibrium (DSGE) model of a regional economy that is considered small because it does not affect its national economy. To examine properties of our small-region DSGE model, we conduct several numerical simulations. Notably, fiscal expansion in our model is larger than that in standard DSGE models. This is because the increase in regional output does not raise interest rates, and this leads to the crowding-in effects of investment.

scholarly journals A NOTE ON AN EXTENSION OF A CLASS OF SOLUTIONS TO DYNAMIC PROGRAMMING PROBLEMS ARISING IN ECONOMIC GROWTH

2011 ◽  
Vol 16 (3) ◽  
pp. 472-476 ◽  
Author(s):  
Jürgen Antony ◽  
Alfred Maußner
Keyword(s):  
Economic Growth ◽  
Dynamic Programming ◽  
General Equilibrium ◽  
Dynamic Stochastic General Equilibrium ◽  
Dsge Models ◽  
Dsge Model ◽  
Savings Rate ◽  
Dynamics And Control ◽  
Dynamic Stochastic ◽  
And Control

This note extends the findings of Benhabib and Rusticchini [Journal of Economic Dynamics and Control 18, 807–813 (1994)], who provide a class of dynamic stochastic general equilibrium (DSGE) models whose solution is characterized by a constant savings rate. We show that this class of models may be interpreted as a standard–representative agent DSGE model with costly adjustment of capital.

ASSET PRICING IN DYNAMIC STOCHASTIC GENERAL EQUILIBRIUM MODELS WITH INDETERMINACY

2007 ◽  
Vol 12 (1) ◽  
pp. 50-71 ◽  
Author(s):  
NATALIA GERSHUN ◽  
SHARON G. HARRISON
Keyword(s):  
Asset Pricing ◽  
General Equilibrium ◽  
Returns To Scale ◽  
Dynamic Stochastic General Equilibrium ◽  
Increasing Returns ◽  
Dsge Model ◽  
Increasing Returns To Scale ◽  
Local Indeterminacy ◽  
Dynamic Stochastic ◽  
The One

We explore asset pricing in the context of the one-sector Benhabib-Farmer-Guo (BFG) model with increasing returns to scale in production and compare our results with financial implications of the standard dynamic stochastic general equilibrium (DSGE) model. Our main goal is to determine the effects of local indeterminacy and the presence of sunspot shocks on asset pricing. We find that the BFG model does not adequately represent key stylized facts of U.S. capital markets and does not improve on the asset-pricing results obtained in the standard DSGE model.

scholarly journals On DSGE Models

2018 ◽  
Vol 32 (3) ◽  
pp. 113-140 ◽  
Author(s):  
Lawrence J. Christiano ◽  
Martin S. Eichenbaum ◽  
Mathias Trabandt
Keyword(s):  
Financial Crisis ◽  
General Equilibrium ◽  
Policy Change ◽  
Great Recession ◽  
Relative Strength ◽  
Dynamic Stochastic General Equilibrium ◽  
Dsge Models ◽  
The Great Recession ◽  
Dynamic Stochastic ◽  
Different Parts

The outcome of any important macroeconomic policy change is the net effect of forces operating on different parts of the economy. A central challenge facing policymakers is how to assess the relative strength of those forces. Economists have a range of tools that can be used to make such assessments. Dynamic stochastic general equilibrium (DSGE) models are the leading tool for making such assessments in an open and transparent manner. We review the state of mainstream DSGE models before the financial crisis and the Great Recession. We then describe how DSGE models are estimated and evaluated. We address the question of why DSGE modelers—like most other economists and policymakers—failed to predict the financial crisis and the Great Recession, and how DSGE modelers responded to the financial crisis and its aftermath. We discuss how current DSGE models are actually used by policymakers. We then provide a brief response to some criticisms of DSGE models, with special emphasis on criticism by Joseph Stiglitz, and offer some concluding remarks.

Macroeconomic Risks and Asset Pricing: Evidence from a Dynamic Stochastic General Equilibrium Model

2019 ◽  
Vol 65 (8) ◽  
pp. 3585-3604 ◽  
Author(s):  
Erica X. N. Li ◽  
Haitao Li ◽  
Shujing Wang ◽  
Cindy Yu
Keyword(s):  
Asset Pricing ◽  
General Equilibrium ◽  
Factor Model ◽  
Dynamic Stochastic General Equilibrium ◽  
Dsge Model ◽  
Cross Sectional ◽  
Dynamic Stochastic ◽  
Monetary Policy Shock ◽  
Macroeconomic Risks

We study the relation between macroeconomic fundamentals and asset pricing through the lens of a dynamic stochastic general equilibrium (DSGE) model. We provide full-information Bayesian estimation of the DSGE model using macroeconomic variables and extract the time series of four latent fundamental shocks of the model: neutral technology shock, investment-specific technological shock, monetary policy shock, and risk shock. Asset pricing tests show that our model-implied four-factor model can explain a number of prominent cross-sectional return spreads: size, book-to-market, investment, earnings, and long-term reversal. The investment-specific technological shock and risk shock play the most important role in explaining those return spreads. This paper was accepted by Neng Wang, finance.

scholarly journals Monetary Policy Analysis with Potentially Misspecified Models

2009 ◽  
Vol 99 (4) ◽  
pp. 1415-1450 ◽  
Author(s):  
Marco Del Negro ◽  
Frank Schorfheide
Keyword(s):  
Policy Analysis ◽  
Recent Literature ◽  
Model Misspecification ◽  
Dynamic Stochastic General Equilibrium ◽  
Dsge Models ◽  
Estimation Of Parameters ◽  
Dsge Model ◽  
Misspecified Models ◽  
Trade Offs ◽  
Dynamic Stochastic

Policy analysis with potentially misspecified dynamic stochastic general equilibrium (DSGE) models faces two challenges: estimation of parameters that are relevant for policy trade-offs, and treatment of the deviations from the cross-equation restrictions. Using post-1982 US data, we study the robustness of the policy prescriptions from a state-of-the-art DSGE model with respect to two approaches to model misspecification pursued in the recent literature: (i) adding shocks to the DSGE model and/or generalizing the processes followed by these shocks; and (ii) explicit modeling of deviations from cross-equation restrictions (DSGE-VAR). (JEL C51, E13, E43, E52, E58)

scholarly journals On non-computability of dynamic stochastic general equilibrium

2020 ◽  
Author(s):  
William Glaciel
Keyword(s):  
General Equilibrium ◽  
Heterogeneous Agents ◽  
Dynamic Stochastic General Equilibrium ◽  
Dsge Models ◽  
Dynamic Stochastic

As can be seen in Richter and Wong (1999), non-computability of general equilibrium has been recognized in economics. However, despite general non-computability, equilibrium can indeed be computed in specific cases. In this paper, further restriction on computability of equilibrium is provided in contexts of dynamic stochastic general equilibrium (DSGE) models with heterogeneous agents, demonstrating that non-computability concerns apply more generally than often understood.

scholarly journals Should the Dynamic Stochastic General Equilibrium (DSGE) Model be taught to Undergraduate Students of Economics?

PAPELES ◽  
2019 ◽  
Vol 10 (19) ◽  
Author(s):  
Álvaro Moreno Rivas
Keyword(s):  
General Equilibrium ◽  
Undergraduate Students ◽  
Dynamic Stochastic General Equilibrium ◽  
Dsge Model ◽  
Equilibrium Models ◽  
General Equilibrium Models ◽  
Undergraduate Economics ◽  
Dynamic Stochastic ◽  
Advanced Teaching

In this article we present the consequences of introducing the advanced teaching of the DSGE (Dynamic Stochastic General Equilibrium) models to undergraduate economics programs. This monoculture leads to the deepening of the discipline insularity, to the disappearance of the paradigmatic plurality inside the economics departments and to the silencing of critical voices. This process obeys Gresham’s Law of ideas: bad models displace good ideas.

scholarly journals Application of dynamic stochastic general equilibrium models to the case of the Serbian economy

2014 ◽  
Vol 59 (201) ◽  
pp. 35-68
Author(s):  
Branko Urosevic ◽  
Nikola Grga
Keyword(s):  
General Equilibrium ◽  
Banking System ◽  
Dynamic Stochastic General Equilibrium ◽  
Dsge Models ◽  
Impulse Response Functions ◽  
Response Functions ◽  
Financial Friction ◽  
Matlab Program ◽  
Dynamic Stochastic ◽  
Financial Dollarization

This paper proposes a dynamic stochastic general equilibrium (DSGE) model for the Serbian economy. It is a modification of the existing models of Goodhart, Osorio and Tsomocos (2009) and Martinez and Tsomocos (2012). The model introduces important features of the Serbian economy, financial dollarization and foreign ownership of the banking system, while retaining the most important element of the reference models, financial friction. To solve the model we use Dynare, a specialized Matlab program for solving DSGE models. The model is subject to three different shocks: monetary, productivity, and regulatory, and the results are presented in the form of impulse response functions. It is concluded that the proposed platform has good characteristics, but its complete application to the case of the Serbian economy requires further research.

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