Dynamic stochastic general equilibrium (DSGE)
Poloz considers the future of economic modelling
Theoretical and empirical two-pronged approach likely to stay, governor says, though economists are still on the hunt for the “holy grail” single model
RBNZ paper sheds light on core macro model
'NZSIM' is a semi-structural model, with a DSGE core augmented with a handful of additional equations
Haldane turns to other disciplines to solve big economic questions
BoE chief economist calls for an interdisciplinary approach to tackling the problems economics faces in understanding complex systems; warns of shortcomings in micro-founded models
BoE paper takes DSGE approach to deflation probabilities
Comparing simulations using a DSGE model estimated on different market-based measures of deflation probability helps to pick out causality, researchers say
Danish economist updates DSGE model with financial frictions
Jesper Pedersen adds imperfectly competitive banking system and housing market to improve model’s ability to explain crises
Climbing ‘Mount Economy’
The BIS’s quest for financial stability-oriented monetary policy throws up questions not only about decision-making but also how one should think about economics, as Claudio Borio explains
Blanchard sees reformed DSGE as ‘central’ to future of macroeconomics
Former IMF chief economist says DSGE models are “seriously flawed” but “eminently improvable”, and will have a leading role to play in the future
Building a fast, flexible and free DSGE model
A team at the New York Fed is part way through translating its DSGE model into Julia, a fast, open-source mathematical programming language
RBA establishes new macro modelling division
External review recommends new approach to “full-system” models at heart of policy analysis, warning modelling expertise is limited at the central bank
Riksbank paper finds BVAR models can outperform DSGE
Bayesian vector autoregressions often produce better forecasts than judgement-based or DSGE-based options, authors find – but DSGE is still more popular for policy-making
Economists still scrambling to adapt models to lower bound
Many traditional economic models perform poorly now major economies are near the effective lower bound, but economists at the RES annual conference offer a range of solutions
BIS paper says trade finance impacts global spillovers
Working paper emphasises importance of including trade finance when modelling global shocks, finding variations in price stickiness are important
Sarb research updates forecasting model
Refinements to central bank’s semi-structural general equilibrium model aim to better reflect the South African economy over the inflation-targeting period
BIS paper captures financial shock using five DSGE models
Authors from the Federal Reserve find even models with a common core produce very different estimates of the spillovers of a financial shock to the real economy
Argentine economists offer alternative to DSGE model on macro and financial interactions
BIS working paper sets out a structural model augmented with a financial sector, which the authors say is more practical in many ways than DSGE models
BoE research warns failure to capture money creation distorts DSGE models
Working paper offers ‘essential ingredients’ of a DSGE model that recognises bank lending as the source of money creation, with significant implications for economic modelling
RBA paper unpacks central bank’s DSGE model
Authors shed light on adapted DSGE model used in Australia, emphasising its deliberate simplicity so additional features can be bolted on as needed
Finnish paper: DSGE model with shadow banks sheds light on China
Bank of Finland discussion paper models Chinese monetary policy transmission using a DSGE model augmented with shadow banking and interest rate controls
‘Fiscal devaluation’ not enough to solve competitiveness problems, IMF paper finds
Research finds rearranging taxes to shift the burden overseas has a muted effect on output, but may be useful as part of a broader package of structural reforms
New York Fed blog to make DSGE forecasts public
Federal Reserve Bank of New York publishing five-part series on DSGE model and how it is used to forecast inflation and output in the US economy
Fed transcripts reveal forecasting travails
Crisis year transcripts reveal extent to which the Federal Reserve struggled to predict the depth of recession and deflation, raising questions about the usefulness of underlying models
IMF paper finds macro-prudential policy can offset loss of monetary autonomy
Researchers build DSGE model of the eurozone to find optimal monetary and macro-prudential mix; find macro-prudential policy boosts welfare and ‘lends a hand’ to monetary policy
Bundesbank paper presents redesigned DSGE model to tackle unconventional policies
Researchers develop DSGE model using two types of banks, repos and haircuts to yield a better understanding of unconventional monetary policy
Spanish paper preaches caution over DSGE models
Researcher finds that DSGE models would not have proved any more use to policy-makers in the 1970s than their ‘old-style’ Phillips curves; warns against putting too much faith in their prescriptions