Questions tagged [dsge]
DSGE - Dynamic Stochastic General Equilibrium models.
64
questions
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Derivation question: Gali (2015), chapter 5, equation 25
I am wondering how Gali derived equation (25) in chapter 5 of his book Monetary Policy, Inflation, and the Business Cycle (2015).
We have equation (21):
$$
\vartheta \hat{x}_{t} = -\kappa \hat{p}_{t} +...
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0answers
11 views
Scope of DSGE models
Since DSGE models are a type of growth models that focus on assessing short term evaluation of economic fluctuations. Most of the models that I have seen are policy related, that assess the effect of ...
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1answer
31 views
Elasticity of intertemporal sustitution with composite CRRA function
In the usual CRRA $\frac{c^{1-\sigma}-1}{1-\sigma}$ function we have that the intertemporal elasticity of sustitution $\partial\frac{c_{t+1}}{{c_{t}}{\partial r}}$ is $\frac{1}{\sigma}$.
But how can ...
3
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1answer
43 views
Literature on DSGE models featuring a financial sector
I recently read a ECB primer on DSGE models featuring the financial sector and became interested in the field. I also started to read some of the earlier literature in that field (e.g. Gertler & ...
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17 views
Deriving log-linearized equilibrium in Galí (2019)
I am reading the Paper "The effects of a money-financed fiscal stimulus" by Galí (2019).
I am trying to derive the log-linearized equilibrium as given in equations (15)-(22). I believe I am ...
1
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1answer
25 views
Are business cycle fluctuations usually studied in a (New Keynesian) DSGE model, or can they also be studied in a growth model?
I wonder if business cycle fluctuations are usually studied in a (New Keynesian) DSGE model, or can they also be studied in a growth model?
1
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7 views
What would it mean for a parameter region to be E-stable but undeterminate?
What would it mean for a parameter region for a dynamic system to be E-stable, but indeterminate?
E-stable: it's stable under learning... so this means, once in equilibrium, you stay there? Or does it ...
2
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0answers
22 views
determinacy vs. indeterminacy of equilibria in dynamic systems
As explained in Hommes (2018), equilibria in dynamic systems, like DSGE models, can either be determinate or indeterminate. A REE (rational expectations equilibrium) is determinate when there exists a ...
2
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1answer
27 views
What is meant by the abbreviation 'MSV solution', used in the context of DSGE modeling?
What is meant by the abbreviation MSV solution, used in the context of adaptive learning in DSGE modeling? E.g. see Bullard and Mitra (2002)
minimum state variable (MSV) solutions it is in full, but ...
0
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2answers
58 views
Expected inflation in the real interest rate equation
Real interest rate = Nominal rate - Expected inflation
In the above equation, in a quarterly data-set, which expected inflation shall be used? next quarter (q+1) or the same quarter of next year (q+4)...
2
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44 views
Micro foundations of the Phillips Curve
In a typical NKPC:
$Inflation_t = \alpha_1 Inflation_{t-1} + (1-\alpha_1) \mathbb{E}_tInflation_{t+1} + \alpha_2 RealMarginalCost + \epsilon_t$
From a micro-foundations perspective, does the ...
2
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0answers
18 views
Are heterogenous expectations models still determinate, closed models?
Cars Hommes proposed many models based on agents having heterogeneous expectations. Agents switch between a fixed set of prediction rules depending on their forecast error history. However, it seems ...
0
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1answer
35 views
Why does a model that is used for policy analysis needs its shocks and parameters to be structural (= invariant) to the shock under consideration?
In their paper, " New Keynesian Models: Not Yet Useful for Policy Analysis"
V. V. Chari, Patrick J. Kehoe, and Ellen R. McGrattan
argue that one needs a structural model in order to analyse the ...
0
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1answer
69 views
Are overlapping generation (OLG) models extensions of a DSGE model?
Are overlapping generation models (OLG) extensions of a dynamic stochastic general equilibrium (DSGE) model? Or aren't these DSGE per se?
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0answers
15 views
Inertia and rational expectations DSGE models
What types of inertia or other phenomena in the data are hard to model with New Keynesian or other DSGE models assuming rational expectations?
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0answers
11 views
What is the name for the techniques that are used to determine the determinacy of DSGE models with rational expectations?
What is the name for the techniques that are used to determine the determinacy of DSGE models with rational expectations?
For some context, see e.g. the work of THE SOLUTION OF LINEAR DIFFERENCE ...
0
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1answer
30 views
Positive productivity shock with a fall in output
I am modeling a two-country world. Within each country there exists a representative infinitely-lived agent, a representative final good producer, a continuum of domestic monopolistic competitive ...
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0answers
6 views
How to fit data in DSGE?
I'm completely new to these models. So after I specified steady-state equations, how do I fit my existing time series.
In Bayesian approach do I just need to find prior mean, std error and ...
3
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0answers
39 views
Elasticity of substitution in leisure
This might be a very basic question, but I am a beginner in macro models. I would appreciate help with my doubt.
In different papers I have read about the elasticity of labor supply or the inverse of ...
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13 views
Are typical macro DSGE (RBC or New Keynesian DSGE) models linear, non-linear, or log (linearized)?
In Carl Hommes 2015 book on Expectations, it seems he considers DSGE models (being it either RBC DSGE or New Keynesian DSGE) to be linear, or (log)linearized models, on page 3 of the introduction. He ...
0
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1answer
20 views
What are main reasons a typical DSGE model is called non-linear? Why are these non-linearities important?
What are main reasons a typical DSGE model is called non-linear? Why are these non-linearities important? Is a non-linear model inherently less stable than a linear model? Why?
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39 views
Log-linear version of current account equation
I am working on my thesis, doing a two-country model with traded and non-traded goods considering incomplete asset markets and imperfect pass-through. In a sense, I am following Benigno & ...
0
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1answer
46 views
Log-linearization of real exchange rate
I have a doubt on how to log linearize an expression for the real exchange rate. I have read in several papers that they express it using substitutions. I haven't been able to find out what ...
0
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1answer
53 views
Log-linear version of the uncovered interest rate parity
I am trying to derive the log-linear version of the uncovered interest rate parity under complete asset markets.
I know that the UIP condition is given by
$$(1+i_t)=(1+i^*_t)\frac{S_{t+1}}{S_t}$$
I ...
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0answers
31 views
Non-traded goods in Two Country New Keynesian Model
I am working on a two-country New Keynesian model, where I include traded and non-traded goods. The final good is produced using traded and non-traded inputs:
$$
Z_t=\bigg[a^\frac{1}{\kappa}Z_{T,t}^{\...
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1answer
67 views
Questions about the future of macroeconomic modeling and the role of simultaneous equation systems
I started to study about macroeconomic modeling and I am interested in the following questions. I understand that there are no definite answers to these questions. But I am interested in the opinion ...
0
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1answer
30 views
DSGE model with agents that develop their skills
Are there DSGE models with agents with different skill levels (and according wage differences) who can develop or lose their skills and with employees with dynamic/changing skill levels and skill ...
2
votes
1answer
140 views
Solving Euler Equation for standard DSGE Models
I am studying a rather standard DSGE Model with a standard Utility function $U = f(c_t, n_t, M_t)$ subject to a budget constraint. Now, tosolve the intertemporal optimization problem I have, or ...
0
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1answer
20 views
Where to find series of capital-output ratio for the US?
While the capital-output ratio is widely used in Macroeconomics as a target in calibration, it is usually just set to be equal to 3, without specifying the data source nor the methodology used to ...
0
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1answer
27 views
Percentage/proportion of published papers with DSGE models
I remember reading a few years back an article that showed an interesting graphic with the percentage/proportion of published papers with DSGE models across time. I've tried searching, but I get so ...
2
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0answers
51 views
What's the advantage of DSGE relative to BVARs?
DSGE models and BVARs are commonly used in academia and policy circles.
They generate different performances (e.g., in forecasting) and perhaps serve different purposes. Notwithstanding, they have a ...
3
votes
1answer
70 views
Is there any mainstream criticism of the Benes-Kumhof conclusion that the Chicago Plan would improve the US economy nowadays?
A 2012 IMF Working paper by Benes and Kumhof "The Chicago Plan Revisited
" has this abstract, finding in favor of the Chicago Plan an all counts basically:
At the height of the Great Depression a ...
3
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1answer
166 views
What is the appeal of DSGE models?
As far as I understand people like them, because they fit the data quite well when compared to VAR's for example while also having an economic interpretation.
They appear to explain observations in a ...
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0answers
23 views
Deriving Sufficient Conditions For Existence of Unique Non-Explosive Equilibrium In DSGE Model With Hybrid New Keynesian Phillips Curve
Consider the following New Keynesian DSGE Model with standard notation:
$\pi_t = \kappa y_t + \gamma_f \mathbb{E}_t[\pi_{t+1}] + \gamma_b \pi_{t-1},$
$y_t = \mathbb{E}_t[y_{t+1}] - \frac{1}{\sigma}(...
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0answers
15 views
Optimal Tax Rates on BGP
I was going through this paper by Aghion et al. I wanted some clarification on some of the computations. I understood the process uptil the normalization on page 22. Then we can get some policy rules ...
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0answers
59 views
Use of DSGE models for the day-to-day government policy decisions? If no - then what are obstacles?
Are DSGE models used for the day-to-day government policy estimation and optimization? E.g. can DSGE model be used for estimation of the return of additional investments in education and how those ...
3
votes
1answer
93 views
How to derive the measurement equation for the state-space representation of a DSGE model?
DSGE models, after log-linearisation, have a state-space representation.
In this representation, in most papers, the measurement/observation equation is simply stated.
I'm wondering how one deduces ...
0
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1answer
22 views
A possible typo in Herbst and Schorfheide book of DSGE estimation
In a state-space representation, the measurement equation is something of this form $O_t=H_t s_t + u_t$, where $O_t$ are the observational data at time $t$, $H_t$ is a possibly time-dependent matrix ...
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0answers
19 views
Deducing eq. (39) of Sims (2002)
Here's the Sims(2002) paper
How does one deduce equation (39) from that paper?
Any help would be appreciated.
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0answers
61 views
Cleaning data for DSGE model estimation: An and Schorfheide (2007)
In Herbst and Schorfheide "Bayesian Estimation of DSGE Models", in the appendix named "Data Sources", they show several formulas relating the empirical data which should be used for the model.
Here's ...
2
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0answers
49 views
What are the linearised equations for the flexible economy in Smets and Wouters (2007)?
To solve the Smets and Wouters (2007) model, we need the linearised equation for the economy when wages and prices are flexible (monetary policy rule depends on the potential output).
However, in ...
2
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0answers
26 views
How to deal with potential output in the Sims (2002) framework?
In Sims(2002), the author explains how one solves a linear rational expectations model.
$$\Gamma_0S_t=\Gamma_1S_{t-1}+C+\Psi z_t + \Pi \mu_t$$
The only thing exogenously defined in the $z_t$ ...
4
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1answer
537 views
Good paper/article on the mechanisms in RBC vs New Keynesian models
I have read technical books about the (baseline) RBC and New Keynesian models.
However, these books tend not to explain very intuitively the propagation mechanisms of shocks between the two models, ...
4
votes
1answer
73 views
Basic New Keynesian Model - Price and Wage Level after shock
I'm currently solving a new Keynesian model with government spending. It's the basic model version, with constant returns to scale on the only production factor work.
Everything has worked out fine ...
5
votes
1answer
310 views
Differences between GMM and MSM?
In wikipedia, the main difference between GMM and MSM(Method of simulated Moments) is in the former the moment/orthogonality conditions can be evaluated analytically, while in the latter they cannot ...
1
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1answer
116 views
DSGE Model Solutions as a Vector Time-Series process. Examples?
I'm trying to understand how the solutions of a DSGE model can be seen as VAR or VARMA.
Can you give examples of DSGE model solutions which can be seen as such? Also, does this only happen when we ...
6
votes
1answer
766 views
What exactly is certainty equivalence in the context of DSGE models?
I keep reading about certainty equivalence in the context of DSGE models.
I understand that it has something to do with "Getting rid of the expectation operator", but I'm not entirely sure? ...
3
votes
1answer
3k views
intuition behind the blanchard kahn conditions?
In order for a DSGE model to have a unique solution, it is required to satisfy the Blanchard Kahn conditions. However, these conditions seem very abstract to me.
Is there an intuition behind the ...
1
vote
1answer
638 views
Textbook on the mathematics of RBC/DSGE models?
I'm reading David Romer's Macroeconomics. However, what I don't like is that he doesn't go at all into detail about the mathematical underpinnings of RBC/DSGE models. When it comes to the central ...
2
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0answers
299 views
What are some good video lectures on DSGE modeling?
Are there any online resources on Dynamic Stochastic General Equilibrium models supplied with video lectures, which include theory and some practical examples of fitting models as well? I did not find ...
