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.

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.

scholarly journals Evolution of Modern Business Cycle Models: Accounting for the Great Recession

2018 ◽  
Vol 32 (3) ◽  
pp. 141-166 ◽  
Author(s):  
Patrick J. Kehoe ◽  
Virgiliu Midrigan ◽  
Elena Pastorino
Keyword(s):  
Business Cycle ◽  
Great Recession ◽  
The United States ◽  
Dsge Models ◽  
Real Business Cycle ◽  
Business Cycle Theory ◽  
The Great Recession ◽  
Modern Business ◽  
Dynamic Stochastic ◽  
The Rich

Modern business cycle theory focuses on the study of dynamic stochastic general equilibrium (DSGE) models that generate aggregate fluctuations similar to those experienced by actual economies. We discuss how these modern business cycle models have evolved across three generations, from their roots in the early real business cycle models of the late 1970s through the turmoil of the Great Recession four decades later. The first generation models were real (that is, without a monetary sector) business cycle models that primarily explored whether a small number of shocks, often one or two, could generate fluctuations similar to those observed in aggregate variables such as output, consumption, investment, and hours. These basic models disciplined their key parameters with micro evidence and were remarkably successful in matching these aggregate variables. A second generation of these models incorporated frictions such as sticky prices and wages; these models were primarily developed to be used in central banks for short-term forecasting purposes and for performing counterfactual policy experiments. A third generation of business cycle models incorporate the rich heterogeneity of patterns from the micro data. A defining characteristic of these models is not the heterogeneity among model agents they accommodate nor the micro-level evidence they rely on (although both are common), but rather the insistence that any new parameters or feature included be explicitly disciplined by direct evidence. We show how two versions of this latest generation of modern business cycle models, which are real business cycle models with frictions in labor and financial markets, can account, respectively, for the aggregate and the cross-regional fluctuations observed in the United States during the Great Recession.

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 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.

Dynamic Stochastic General Equilibrium Models

2018 ◽  
Author(s):  
Michel Juillard
Keyword(s):  
General Equilibrium ◽  
Prior Information ◽  
Local Approximation ◽  
Dynamic Stochastic General Equilibrium ◽  
Perturbation Approach ◽  
Dsge Models ◽  
Deterministic Models ◽  
New Information ◽  
Solution Methods ◽  
Dynamic Stochastic

Dynamic Stochastic General Equilibrium (DSGE) models have become popular in macroeconomics, but the combination of nonlinear microeconomic behavior of the agents and model-consistent expectations raise intricate computational issues; this chapter reviews solution methods and estimation of DSGE models. Perfect foresight deterministic models can easily be solved with a great degree of accuracy. In practice, medium-sized stochastic models can only be solved by local approximation or the perturbation approach. The Bayesian approach to estimation is privileged. It provides a convenient way to communicate both the prior information available to the econo-metrician and new information revealed by the data. This chapter focuses on methods frequently used in applied work rather than aiming at being exhaustive.

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