Questions tagged [dsge]
DSGE - Dynamic Stochastic General Equilibrium models.
103 questions
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Expectations operator in Euler equation
There is a standard Euler equation derivation for household utility maximization problem:
$$max_{\{C_i,N_i, B_i\}_{i=0}^{\infty}} \quad U=E_0\sum_{t=0}^{\infty} \beta^t u(C_t, N_t)$$
$$s.t. \quad ...
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A list of DSGE models written in Python
I intend this question to become a reference to people looking for DSGE models in Python, very similar to questions asking about bibliographical references on an area of macroeconomics.
The DSGE ...
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Log-Linearization in Calvo Pricing
Can anyone please provide a step by step derivation of the log-linearized form of the following equation. I've tried to get from the first equation to the second but to no avail. I'm really struggling....
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Stock price equation Nakamura and Steinsson (2018a)
I am in the process of deriving all equations in the DSGE model of Nakamura and Steinsson (2018a). So far, everything is derived correctly, but when I had a look into the replication files (https://...
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DSGE some derivation
I am currently studying the lecture note from Jesus. In page 49, he provides 4 equilibrium conditions:
$$\frac1{c_t} = \beta E_t\left\{\frac1{c_{t+1}}\left(1 + \alpha e^{z_{t+1}}k_{t+1}^{\alpha -1}l_{...
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New Keynesian DSGE - Dynare
I have a question about solving New Keynesian models, particularly on Dynare. In some textbooks, I have seen that they log-linearize basic NK models and arrive at 3 equations, such as Phillips and IS ...
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Resources for a Deep Dive into the New Keynesian / DSGE models
I would like to deep dive into new Keynesian models and DSGE models. Do you know comprehensive resources that cover both the mathematical and economic requirements?
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Durable goods in a (two sector) necolassical growth model
i want to add a firm to a neoclassical growth model that produces a durable good which it rents out in each period to the consumers.
Right now i'm using the following approach:
The firm maximizes: $\...
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Gopinath et al (2019)
I am looking for explanation and demonstration on the Gopinath model:
The per-period utility function is separable in consumption and labor and given by:
$$U(C_{j;t};N_{j;t})= \frac{1}{1-\sigma_c}C^{1-...
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how to Log-linear this equation?
I am working on my thesis, doing a model with energy price. I am following this paper "Energy Price Shocks and Financial Market Integration: Evidence from New Keynesian Model", Tarek ...
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What rules apply integrals over a continuum of agents in a symmetric equilibrium?
Suppose I have a model with a continuum of agents denoted by $i \in [0;1]$. In a symmetric equilibrium, i.e. in a equilibrium where $x_i = x_j$ for all $x,i$, would I be able to conclude that: and ...
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DSGE: Difference between Goods Market Clearing Condition and Resources Constraint
I’m currently reading about DSGE models and I’m little bit confused about the difference between the resources constraint and the goods market clearing condition. Are they the same? If not, how is ...
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Writing DSGE model in state space form
I keep returning to this example I’d like to try: I’m trying to estimate the likelihood of a nonlinearized DSGE model using a particle filter. While I understand particle filtering, I have little ...
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Conceptual question about the zero-inflation steady-state in DSGE-models
As I understand, it is usually common practice, to choose DSGE models in such a way, that the steady-state inflation is freely choose-able and for simplifications it is than usually assumed to be zero....
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Help with the log-linearization of a difficult term
I'm currently trying to retrace a log-linearization done in this paper. I want to log-linearize around the steady-state, as it is commonly done for DSGE models (see here). $\bar{x_t}$ are steady-state ...
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Log-linearizing a second order term around the steady-state
I'm currently trying to retrace a log-linearization done in a paper. I want to log-linearize around the steady-state, as it is commonly done for DSGE models (see here) and I want to disregard all ...
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The Canonical New-Keynesian Model
I'm trying to learn about new-keynesian models hw they were derived. However, I found great difficulty in deriving the equations used in many studies and the lack of books and papers that mention ...
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Help me understand the shock process in this DSGE model
I'm looking at the model proposed in Hansen2020.
The not linearized model features a shock equation looking like this:
$A_t = \bar{A}*e^{\epsilon_t}$ , where $\bar{A}$ is the steady state of $A_t$ and ...
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When do Economists use the Linear Quadratic Regulator in simulating DSGE models
I was watching some excellent videos on DSGE models by Klaus Pretner. The author was able to solve some simple model such as the Ramsey-Cass-Koopman's model, and a New Keynesian model with frictions, ...
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Monthly vs quarterly calibration of models
I'm struggling with moving from a quarterly calibration of a baseline NK model to the corresponding monthly calibration, so that IRFs give the same results with the appropriate timing.
What are the ...
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What are the assumptions made about fixed points in the dynamics equations of Recursive macroeconomics?
I am new to Macroeconomics, but I understand the basics of Recursive Macroeconomic models--following the Ljungqvist and Sargent book. So I get the basic recursive problem to find a vector of ...
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When does it make sense to use variational methods, versus dynamic programming, versus nonlinear control methods so solve DSGE models
I come from a statistics and applied math background, but have been looking at some problems related to macroeconomic DSGE models lately. So I am still trying to understand the ideas and economics ...
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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 ...
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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 ...
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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 ...
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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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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:
$$0=E_t\sum_{i=0}^\infty(\beta\theta_w)^{t+i}\left\{\psi_W\left[L_{t+i}\left(\frac{W_{...
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How to define the natural rate output
I'm following Woodford's Interest & Prices to derive the microfundations for a New Keynesian model with staggereed prices.
I defined the utility function and disutility function (1.1 at page 144) ...
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Basic New Keynesian model with flexible price
I would like to know what would be the response of variables in the Basic New Keynesian model but with flexible prices (ie not with Calvo pricing). For example I have troubles to see how having ...
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functional form for a consumption shock
In a DSGE model, how can I add a disturbance/shock in the consumption of households?
For example given my utility function
$$ U(C,H) = \frac{C_t^{1-\theta}}{1-\theta} - \frac{B}{\eta} H_t^\eta,$$ ...
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Search and Matching model with 2 agents?
I would like to know if you know any model with Search and matching framework (Mortenses-Pisarides style) with 2 types of workers (like Ricardian and rule of thumb consumers for exemple) ? I would ...
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Is IS-LM still used in research or we learn it just to understand basic macro?
Since i had my "Introduction to advanced macroeconomics" and discovered DSGE i've been wondering if IS-LM is used in research, i know it was used in the 80's or so, but now?
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How can difference equations with an infinite summation be represented in matrix form?
I have derived the microeconomic foundations of a dsge model and I've obtained the IS and NKPC. I would like to represent them in matrix form to study the system. However the problem is that both ...
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Derivation question: Gali (2015), chapter 5, equation 25
I am wondering how Gali derived equation (25) in chapter 5 of his book Monetary Policy, Inflation, and the Business Cycle (2015).
We have equation (21):
$$
\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 ...
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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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