2024-03-29T07:07:49
114013
Fri Mar 29 07:07:50 EDT 2024
Replication data for: On DSGE Models
Lawrence J. Christiano
Martin S. Eichenbaum
Mathias Trabandt
114013
https://doi.org/10.3886/E114013V1
The outcome of any important macroeconomic policy change is the net effect of forces operating on different parts of the economy. A central challenge facing policymakers is how to assess the relative strength of those forces. Economists have a range of tools that can be used to make such assessments. Dynamic stochastic general equilibrium (DSGE) models are the leading tool for making such assessments in an open and transparent manner. We review the state of mainstream DSGE models before the financial crisis and the Great Recession. We then
describe how DSGE models are estimated and evaluated. We address the question of why DSGE modelers—like most other economists and policymakers—failed to predict the financial crisis and the Great Recession, and how DSGE modelers responded to the financial crisis and its aftermath. We discuss how current DSGE models are actually used by policymakers. We then
provide a brief response to some criticisms of DSGE models, with special emphasis on criticism by Joseph Stiglitz, and offer some concluding remarks.
E12 General Aggregative Models: Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
E13 General Aggregative Models: Neoclassical
E32 Business Fluctuations; Cycles
E44 Financial Markets and the Macroeconomy
E52 Monetary Policy
E62 Fiscal Policy
G01 Financial Crises