# Tag Info

Accepted

### Does julia's speed advantage over python make any difference for DSGE modeling?

Julia is actually a lot faster than Python, also when running DSGE models. The NY FED moved their DSGE model to Julia because it allows them to: Estimate models 10x faster Complete 'solve' test 11x ...
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### Textbook on the mathematics of RBC/DSGE models?

The mathematical theory behind DSGE models can be found in any textbook on stochastic dynamic optimisation. One common reference that economists use for this is Stokey, Lucas and Prescott. Of course, ...
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### Intuition for the CES consumption index in New-Keynesian DSGE models

Heuristically, you can think of the integral as just a sum: $$\bar{C} = \left( \sum_{i=1}^n C_i^{1-\frac{1}{\epsilon}} \right)^{\frac{\epsilon}{\epsilon - 1}}$$ where $\bar{C}$ is an index of ...

### Interest rate rule in monetary DSGE model

I've just solved this problem. First of all, your solution does not make too much sense, as in a simple interest rate rule it must hold that the sum of all coefficients must be greater than one. In ...
• 148
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### Ultra simple DSGE to implement

As mentioned by Michael quantecon has good resources. Here is an example of very simple DSGE model from quantecon. I am not sure if you can get to as low as 3 equations but here is very simple example ...
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### Ultra simple DSGE to implement

Jordi Galís book "Monetary Policy, Inflation, and the Business Cycle" features the 3-equation "Simple New Keynesian" Model: \begin{align*} \pi_t &= \beta E_t[\pi_{t+1}] + \...
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### Does julia's speed advantage over python make any difference for DSGE modeling?

There are certainly cases where the performance differences between Python and Julia matter, but solving a simple DSGE model is not one of them. There have been some formal comparison exercises (e.g., ...
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### What are the assumptions made about fixed points in the dynamics equations of Recursive macroeconomics?

On pages 53-55 of the Stokey, Lucas, with Prescott (1989) book they discuss the Contraction Mapping Theorem. This theorem guarantees existence and uniqueness of the solution (one fixed point). The ...
• 574
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### What is the appeal of DSGE models?

To summarize what I wrote below, there seem to be at least two points: In the Smets and Wouters (ECB) research, which is apparently responsible for a lot of the fame of DSGE, they indeed found it ...

### How to derive the measurement equation for the state-space representation of a DSGE model?

First, you can also have a state-space setup for a model which is not log-linearised. It is the combination of the solution of your model (that you get by using Sims, Klein, Binder-Pesaran, or ...

### What exactly is certainty equivalence in the context of DSGE models?

Intuitively, it means that the model has such characteristics that "the best we can say" about remaining uncertainty, is that it will be zero. From general experience, we know that it won't be zero, ...
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### intuition behind the blanchard kahn conditions?

The condition that unstable eigenvalues equal in number the control/decision/non-predetermined variables is equivalent to the requirement that a model possess the "saddle point property". Of more ...
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### Literature on DSGE models featuring a financial sector

This is actually one of the more exciting development in DSGE modelling since financial crisis. Including financial sector or friction is definitely a growing area of research and interest. ...
• 57.7k
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### Separation rate

They consider a model with two islands: a Production island and a Leisure island. Every transition from a period $t$ to a period $t+1$ is split into two parts. People who are in the Production island ...
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### Economic growth in a DSGE model, despite mean-zero shocks

Yes, there are DSGE models that can be used for forecasting. These models typically have a particular kind of steady-state, which is, more precisely, called balanced growth path (BGP). On the BGP (in ...
• 1,652
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### Log-linearizing a second order term around the steady-state

If $\Pi_t$ is gross inflation then indeed $(\Pi_t-1)^2$ is a second-order term and is approximately zero. For example, for a reasonable quarterly steady state gross inflation rate of 1.005, the term ...
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• 57.7k
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### Questions about the future of macroeconomic modeling and the role of simultaneous equation systems

Is there future for DSGE? Well, DSGE stands for dynamic stochastic general equilibrium models. You can’t really model time series appropriately without the dynamic stochastic part, and when it comes ...
• 57.7k
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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?

This is due to the famous Lucas critique. To make long story short, in the past in the heyday of Keynesian macroeconomics it was quite normal for macroeconomists to just postulate some relationships ...
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### Are overlapping generation (OLG) models extensions of a DSGE model?

You can find OLG models that do not classify as DSGE (in particular, the model might not be stochastic) as well as DSGE with overlapping generations (contrary to those with infinitely lived agents). ...
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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?

Business cycle fluctuations can be studied in many ways including also growth models. An example of using growth model to study business cycle would be this 1995 paper by Cho & Cooley. This being ...
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