Some notes on problematic issues in DSGE models
We review some of the problematic issues in DSGE models, which are currently much discussed in the economics profession. All of these issues are concerned with the DSGE models’ (in)ability to match aspects of macroeconomic variables’ observed behaviour. The optimizing agents framework im...
Main Authors: | , , |
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Format: | Article |
Language: | English |
Published: |
Faculty of Economics, Belgrade
2016-01-01
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Series: | Ekonomski Anali |
Subjects: | |
Online Access: | http://www.doiserbia.nb.rs/img/doi/0013-3264/2016/0013-32641610079S.pdf |
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author | Slanicay Martin Čapek Jan Hloušek Miroslav |
author_facet | Slanicay Martin Čapek Jan Hloušek Miroslav |
author_sort | Slanicay Martin |
collection | DOAJ |
description | We review some of the problematic issues in DSGE models, which are currently
much discussed in the economics profession. All of these issues are
concerned with the DSGE models’ (in)ability to match aspects of
macroeconomic variables’ observed behaviour. The optimizing agents framework
implies that Ricardian equivalence typically holds, which is clearly at odds
with the empirical evidence. A distinguishing feature of DSGE models is the
assumption that structural parameters are invariant to policy changes. We
argue that not all of them can be considered independent from economic
policy. It is typical for DSGE models that agents form rational
expectations, which can be considered unrealistic. The typical procedure for
estimating a DSGE model is to use revised data. As some empirical studies
suggest, a model’s behaviour may be different if real-time data are
considered. It is also usually assumed that the monetary authority uses the
interest rate as a tool of monetary policy. Nowadays, nominal interest rates
are close to zero in many economies and cannot be lowered further. |
first_indexed | 2024-04-12T05:27:00Z |
format | Article |
id | doaj.art-869a24e6f84e4d4e9078e5b600204dda |
institution | Directory Open Access Journal |
issn | 0013-3264 1820-7375 |
language | English |
last_indexed | 2024-04-12T05:27:00Z |
publishDate | 2016-01-01 |
publisher | Faculty of Economics, Belgrade |
record_format | Article |
series | Ekonomski Anali |
spelling | doaj.art-869a24e6f84e4d4e9078e5b600204dda2022-12-22T03:46:14ZengFaculty of Economics, BelgradeEkonomski Anali0013-32641820-73752016-01-0161210799910.2298/EKA1610079S0013-32641610079SSome notes on problematic issues in DSGE modelsSlanicay Martin0Čapek Jan1Hloušek Miroslav2Masaryk University, Faculty of Economics and Administration, Brno, Czech RepublicMasaryk University, Faculty of Economics and Administration, Brno, Czech RepublicMasaryk University, Faculty of Economics and Administration, Brno, Czech RepublicWe review some of the problematic issues in DSGE models, which are currently much discussed in the economics profession. All of these issues are concerned with the DSGE models’ (in)ability to match aspects of macroeconomic variables’ observed behaviour. The optimizing agents framework implies that Ricardian equivalence typically holds, which is clearly at odds with the empirical evidence. A distinguishing feature of DSGE models is the assumption that structural parameters are invariant to policy changes. We argue that not all of them can be considered independent from economic policy. It is typical for DSGE models that agents form rational expectations, which can be considered unrealistic. The typical procedure for estimating a DSGE model is to use revised data. As some empirical studies suggest, a model’s behaviour may be different if real-time data are considered. It is also usually assumed that the monetary authority uses the interest rate as a tool of monetary policy. Nowadays, nominal interest rates are close to zero in many economies and cannot be lowered further.http://www.doiserbia.nb.rs/img/doi/0013-3264/2016/0013-32641610079S.pdfDSGE modelfiscal policystructural parametersrational expectationslearning algorithmreal-time datazero lower bound |
spellingShingle | Slanicay Martin Čapek Jan Hloušek Miroslav Some notes on problematic issues in DSGE models Ekonomski Anali DSGE model fiscal policy structural parameters rational expectations learning algorithm real-time data zero lower bound |
title | Some notes on problematic issues in DSGE models |
title_full | Some notes on problematic issues in DSGE models |
title_fullStr | Some notes on problematic issues in DSGE models |
title_full_unstemmed | Some notes on problematic issues in DSGE models |
title_short | Some notes on problematic issues in DSGE models |
title_sort | some notes on problematic issues in dsge models |
topic | DSGE model fiscal policy structural parameters rational expectations learning algorithm real-time data zero lower bound |
url | http://www.doiserbia.nb.rs/img/doi/0013-3264/2016/0013-32641610079S.pdf |
work_keys_str_mv | AT slanicaymartin somenotesonproblematicissuesindsgemodels AT capekjan somenotesonproblematicissuesindsgemodels AT hlousekmiroslav somenotesonproblematicissuesindsgemodels |