Danish economist updates DSGE model with financial frictions
Improved model is better able to explain financial crises
An economist at the National Bank of Denmark has updated a dynamic stochastic general equilibrium (DSGE) model of the Danish economy, presenting the results in a working paper published on October 3.
Jesper Pedersen, one of the economists who designed the original model, has now updated it with housing market and financial frictions, as he noted the model would not have been able to capture a shock such as the 2008 financial crisis under its previous specification.
In the housing sector, patient
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