Questions tagged [dsge]

DSGE - Dynamic Stochastic General Equilibrium models.

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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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1answer
89 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 ...
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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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43 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 ...
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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 ...
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35 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 & ...
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0answers
50 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 ...
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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 ...
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48 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 ...
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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 $z_t$ ...
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293 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 ...
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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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14 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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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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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
112 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 ...
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22 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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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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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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358 views

SVAR Historical decomposition

Does anyone know how to do VAR historical decomposition of a series in R?
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15 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 ...
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1answer
27 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)...
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10 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 ...
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27 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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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 ...
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58 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 ...