Questions tagged [dsge]
DSGE - Dynamic Stochastic General Equilibrium models.
82
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Real effect of monetary policy
In the article The State of New Keynesian Economics: A Partial Assessment, Gali says the following about the monetary policy in DSGE models: "Exogenous changes in monetary policy have nontrivial ...
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MLE on Structural VAR / DSGE
I have a simple DSGE model that I wish to fit using data. The model is of the form:
\begin{gather}
y_t = -\lambda r_t + \theta a_t + \varepsilon_1 \\ \\
\pi_t = \pi_{t-1} + w y_t + \varepsilon_2 \\ \\
...
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DSGE Bayesian estimation - Sum of Squares equivalence
Say I have a DSGE that produces several observable outputs (e.g. GDP, inflation, interest rate), and I want to estimate this model using empirical data (in the form of a set of time series of the ...
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Does julia's speed advantage over python make any difference for DSGE modeling?
When compared to Python the main selling point of Julia is its speed as it is often argued. However, from my own personal experience I never noticed any significant difference in speed between Julia ...
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Bootstrapping standard errors in SMM estimation
I have estimated a number of key parameters in a model by the Simulated Method of Moments. So far, I have computed asymptotic standard errors (that rely on computing numerical derivatives, where we ...
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Economic growth in a DSGE model, despite mean-zero shocks
The DSGEs I've seen have steady-states, and mean-zero shocks.
Can these predict growth in GDP / capital etc?
Is this possible despite them being equilibrium models, or do you have to completely change ...
- 91
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IS equation in a DSGE: interpretation
I am solving a DSGE model and I derived the following expression for the IS equation:
However, I have some problems interpreting this equation. How would you interpret it?
is the domestic output
is ...
- 23
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2
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Questions regarding DSGE model
Christiano,2017, abstract stated that
Macroeconomic policy questions involve trade-offs between competing
forces in the economy. The problem is how to assess the strength of
those forces for the ...
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Get empirical steady state moments for calibrating a DSGE model
I want to calibrate some parameters of my DSGE model so that in the steady state some variable ratios, that are present in data, are met. My question is, how do I get such ratios from time series ...
- 717
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Separation rate
I want to refer to the paper Aggregate implications of indivisible labor, incomplete markets, and labor market frictions. In Footnote 9, there is a brief explanation of how the separation rate is ...
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Why do investment adjustment and capital adjustment costs yield different dynamics?
Both the Business Cycle and DSGE literature find that Investment adjustment costs and capital adjustment costs give rise to different dynamics for investment, output, consumption etc. Investment ...
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Deriving the New Keynesian Phillips Curve (NKPC)
I have a question regarding the NKPC. I would like to know if it is possible to derive the NKPC from a sticky prices model, without making assumptions regarding the production function firms face. I ...
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2
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Ultra simple DSGE to implement
I want to create a DSGE model in Python. I want to build it myself to help me understand it (not just use a library)
Can someone direct me to a very simple model which would be straightforward to ...
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Inflation in Equilibrium
Suppose we have the following market-clearing condition for the goods market within a New-Keynesian setting:
$$
c_t = (1-\alpha)(1-\frac{\phi}{2}\pi_t^2)y_t + \alpha (1-\frac{\phi}{2}\pi_{t-1}^2)y_{t-...
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Problem to find steady state when I assume Y=1
I am trying to do a DSGE model in Matlab, I have all the steady state equations on paper and pencil but I fail to find values for all variables.
Indeed, since I have constant return to scale, I have ...
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Derive optimal wage in New Keynesian-Calvo wage stickiness
Following Costa, 2016 in page 96, developing the labor variety optimal wage decided by the household, the FOC is:
$$0=E_t\sum_{i=0}^\infty(\beta\theta_w)^{t+i}\left\{\psi_W\left[L_{t+i}\left(\frac{W_{...
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How to define the natural rate output
I'm following Woodford's Interest & Prices to derive the microfundations for a New Keynesian model with staggereed prices.
I defined the utility function and disutility function (1.1 at page 144) ...
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2
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Basic New Keynesian model with flexible price
I would like to know what would be the response of variables in the Basic New Keynesian model but with flexible prices (ie not with Calvo pricing). For example I have troubles to see how having ...
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functional form for a consumption shock
In a DSGE model, how can I add a disturbance/shock in the consumption of households?
For example given my utility function
$$ U(C,H) = \frac{C_t^{1-\theta}}{1-\theta} - \frac{B}{\eta} H_t^\eta,$$ ...
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1
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Search and Matching model with 2 agents?
I would like to know if you know any model with Search and matching framework (Mortenses-Pisarides style) with 2 types of workers (like Ricardian and rule of thumb consumers for exemple) ? I would ...
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Is IS-LM still used in research or we learn it just to understand basic macro?
Since i had my "Introduction to advanced macroeconomics" and discovered DSGE i've been wondering if IS-LM is used in research, i know it was used in the 80's or so, but now?
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How can difference equations with an infinite summation be represented in matrix form?
I have derived the microeconomic foundations of a dsge model and I've obtained the IS and NKPC. I would like to represent them in matrix form to study the system. However the problem is that both ...
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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} +...
- 21
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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 ...
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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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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?
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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 ...
- 509
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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 ...
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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 ...
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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)...
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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 ...
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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 ...
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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 ...
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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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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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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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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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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 ...
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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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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 & ...
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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 ...
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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}$$
I ...
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Non-traded goods in Two Country New Keynesian Model
I am working on a two-country New Keynesian model, where I include traded and non-traded goods. The final good is produced using traded and non-traded inputs:
$$
Z_t=\bigg[a^\frac{1}{\kappa}Z_{T,t}^{\...
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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 ...
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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 ...
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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 ...
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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 ...
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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 ...
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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 ...
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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 ...
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