Questions tagged [dsge]
DSGE - Dynamic Stochastic General Equilibrium models.
103 questions
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Can Dynare solve general equilibrium (GE) models with non-convex adjustment costs?
I know that Dynare (which sits on top of Matlab) can solve many kinds of dynamic stochastic general equilibrium (DSGE) and overlapping generations (OLG) models. I also know that Dynare can handle some ...
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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? ...
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State of general equilibrium theories Post Blanchard 2008
This question arose from a useful comment I received upon answering a question on this site, and a recent question from a doctoral student.
The so-called theory of general equilibrium (including 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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DSGE models (Dynare) are only based on simulations and approximations? (without data)
I'm beginner in DSGE models. Are they only based on simulations and approximations? Don't we have any real data-sets (for example interest rate, labor force, etc) ...
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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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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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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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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 ...
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What methods - inspired by Haavelmo’s Structural Econometrics - can show that a partial equilibrium model is unreliable?
According to Spanos 2014 Revisiting Haavelmo's Structural econometrics: Bridging the gap between theory and data Dynamic Stochastic General Equilibrium models are statistically inadequate, in such an ...
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In economic modelling, how are we sure the linearized equilibria behave similarly to original equilibria?
The following problem is in the context of continuous time, although I suspect something could be said about discrete time also.
Let's assume that we have the following equation:
$$\dot x=f(x)$$
...
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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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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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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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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 ...
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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, ...
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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 ...
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Government expenditure multiplier in the new-Keynesian model?
Does a temporary increase in government expenditure increase output in the standard new-Keynesian DSGE model? Is it possible to draw any intuitive parallels between the impact of government ...
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Convert DSGE paper to structural econometrics, anything to be noted？
I'm intent to bring some insights of a DSGE paper to a structural econometric model. The paper is Liu, Wang and Zha's 2013 Econometrica paper on land collateral channel. Now I have some good datasets ...
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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 ...
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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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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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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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Value function iterations with hyperbolic discounting
I am currently working to the numerical solution of a model similar to the consumption-savings decision model with hyperbolic discounting as in Krussel et al. (2003).
Even if hyperbolic discounting ...
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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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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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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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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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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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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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Interest rate rule in monetary DSGE model
I am studying DSGE models and try to solve exercise 2.2 from Gali's (2008) book. In short, consider the simple classical economy where the following approximate equilibrium conditions must be ...
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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....
2
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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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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?
2
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1
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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 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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Log linearization of the technology dynamic
I am still dealing with DSGE models and with log-linearization of characteristic equations of the model. The one that creates me more doubts is the technology shock, that is usually modeled as an AR(1)...
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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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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) ...
2
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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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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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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 ...
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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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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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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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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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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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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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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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