Dsge Models

Thomas Winberry

A method for solving heterogeneous-agent models with aggregate shocks that replaces the infinite-dimensional distribution with a flexible parametric family, treats that family's moments as endogenous …

Tobias Adrian · Christopher Erceg · Marcin Kolasa · Jesper Lindé · Pawel Zabczyk

A microfounded two-country New Keynesian model, calibrated separately to a representative emerging market and a representative advanced economy, in which limited FX-market risk-bearing capacity and an …

Tobias Adrian · Christopher Erceg · Jesper Lindé · Pawel Zabczyk · Jianping Zhou

An empirically-oriented New Keynesian small open economy model, of the kind central banks use, built to quantify when foreign exchange intervention and capital flow management tools improve monetary …

Jesús Fernández-Villaverde · Juan F. Rubio-Ramírez · Thomas J. Sargent · Mark W. Watson

This 2007 American Economic Review paper by Fernández-Villaverde, Rubio-Ramírez, Sargent, and Watson asks when the structural economic shocks in a DSGE model's state-space representation can be …

Mathieu Pedemonte · Hiroshi Toma · Esteban Verdugo

Consumers' inflation expectations are heterogeneous across birth cohorts and history-dependent: using panel data from the Survey of Consumer Expectations (SCE), the paper documents that each cohort's …

Frank Smets · Raf Wouters

A sticky-price, sticky-wage dynamic general equilibrium model of the euro area, with habit formation, investment adjustment costs and variable capacity utilisation, is estimated by Bayesian methods on …

Greta Meggiorini · Fabio Milani

The Behavioral New Keynesian model fixes the forward guidance puzzle by making agents myopic: "cognitive discounting", in Gabaix's (2014, 2016, 2020) formulation, shrinks expectations of distant …

Morten O. Ravn · Stephanie Schmitt-Grohé · Martín Uribe

If households form habits over individual goods rather than over a consumption aggregate, the demand a firm faces depends on its own past sales, its pricing problem becomes dynamic, and mark-ups turn …

Adrien Auclert · Evan Majic · Matthew Rognlie · Ludwig Straub

Auclert, Majic, Rognlie, and Straub show that the sequence-space Jacobians used to solve macro models with rich heterogeneity have a special "quasi-Toeplitz" mathematical structure, which yields a …

Lawrence J. Christiano · Mathias Trabandt · Karl Walentin

This 2011 Handbook of Monetary Economics chapter is a selective survey and original empirical estimation of medium-scale New Keynesian DSGE models for monetary policy analysis. It first works through …

Stephen D. Morris

This 2017 Journal of Economic Dynamics & Control paper by Stephen D. Morris is a methodological contribution explaining why maximum-likelihood or Bayesian estimates of DSGE structural parameters often …

Mariano Kulish · James Morley · Tim Robinson

This 2017 Journal of Monetary Economics paper by Mariano Kulish, James Morley, and Tim Robinson addresses a practical problem in Bayesian estimation of DSGE models: once the policy rate is pinned at …

David Altig · Lawrence J. Christiano · Martin Eichenbaum · Jesper Lindé

Estimated New Keynesian models reconcile inertial inflation with Calvo pricing only by forcing firms to re-optimise prices once every two years or more, which micro price data contradict. Making …

Jeffrey C. Fuhrer

Standard optimising consumption models make spending jump on impact when a shock hits, which the data flatly contradict; replacing time-separable utility with habit formation gives consumers a motive …

François Gourio · Anil K. Kashyap

Plant-level data from Chile and the U.S. show that swings in aggregate investment come almost entirely from changes in how many establishments are having an investment spike, not how big those spikes …

Sandra Daudignon · Oreste Tristani

This paper analyzes how monetary policy should respond to a long-run natural interest rate that can drift permanently — following a bounded random walk with upper bound 3 percent and lower bound 0 …

V. V. Chari · Patrick J. Kehoe · Ellen R. McGrattan

This 2009 American Economic Journal: Macroeconomics paper by V. V.

Lawrence J. Christiano · Martin Eichenbaum · Charles L. Evans

This 2005 Journal of Political Economy paper by Christiano, Eichenbaum, and Evans (CEE) builds and estimates a general-equilibrium model to answer a specific question: what combination of frictions …

Lawrence J. Christiano · Martin S. Eichenbaum · Mathias Trabandt

This 2018 Journal of Economic Perspectives essay by Lawrence Christiano, Martin Eichenbaum, and Mathias Trabandt is a perspective/survey defense of dynamic stochastic general equilibrium (DSGE) …

Christopher Gust · Edward Herbst · David López-Salido

Central banks must set policy under uncertainty about how private-sector expectations form, which changes how monetary policy transmits to output and inflation. This paper studies optimal …

Frank Smets · Rafael Wouters

A New Neoclassical Synthesis model of the US economy with seven structural shocks and a full set of real and nominal frictions is estimated on seven quarterly series by Bayesian methods, and shown to …

Christian Bayer · Ralph Luetticke

A solution method for discrete-time heterogeneous-agent models with aggregate risk that extends Reiter's perturbation approach by compressing the state space after the no-aggregate-risk stationary …

Harald Uhlig

In a calibrated neoclassical growth model with distortionary labor and capital taxes, an ARRA-style government spending increase produces short-run net-present-value fiscal multipliers above one, but …

V. V. Chari · Patrick J. Kehoe · Ellen R. McGrattan

Staggered price-setting was long hoped to turn a short spell of exogenous price stickiness into a long spell of endogenous stickiness, and so into persistent output movements after a monetary shock. …

Enrique G. Mendoza

A standard small-open-economy business-cycle model, augmented with a collateral constraint that caps total debt -- including within-period working-capital loans -- at a fraction of the market value of …

Michael T. Belongia · Peter N. Ireland

This 2014 Journal of Econometrics paper by Michael Belongia and Peter Ireland asks whether Barnett's (1980) decades-old critique of simple-sum monetary aggregation -- that adding up the nominal values …

Robert G. King

King gives a simple exposition of the "New IS-LM model" -- a three-equation system of a forward-looking IS curve, a Fisher equation, and a New Keynesian (expectational) Phillips curve, each derivable …

Vadym Lepetyuk · Lilia Maliar · Serguei Maliar · John B. Taylor

When a central bank announces a policy it will not implement for some time, households and firms respond straight away. This paper measures how much of a policy's effect arrives in that anticipation …

Adrien Auclert · Bence Bardóczy · Matthew Rognlie · Ludwig Straub

Auclert, Bardóczy, Rognlie, and Straub introduce the "sequence-space Jacobian," a fast algorithm for computing the first-order derivatives of general-equilibrium heterogeneous-agent models with …

Stephen D. Morris

This 2016 Economics Letters paper by Stephen D. Morris asks how concise the VARMA (vector autoregressive moving-average) representation of a DSGE model can be made, and whether the model's structural …

Federico Ravenna

This 2007 Journal of Monetary Economics paper by Federico Ravenna asks a purely methodological question with direct consequences for structural VAR (SVAR) practice: under what conditions does a DSGE …

Lawrence Christiano · Martin Eichenbaum · Sergio Rebelo

The government-spending multiplier can be much larger than one when the zero lower bound on the nominal interest rate binds, and the larger the fraction of the spending that occurs while the nominal …