SOME NOTES ON PROBLEMATIC ISSUES IN DSGE MODELS

J 2016

SOME NOTES ON PROBLEMATIC ISSUES IN DSGE MODELS

SLANICAY, Martin, Jan ČAPEK and Miroslav HLOUŠEK

Basic information

Original name

SOME NOTES ON PROBLEMATIC ISSUES IN DSGE MODELS

Authors

SLANICAY, Martin (203 Czech Republic, belonging to the institution), Jan ČAPEK (203 Czech Republic, guarantor, belonging to the institution) and Miroslav HLOUŠEK (203 Czech Republic, belonging to the institution)

Edition

Economic Annals, 2016, 0013-3264

Other information

Language

English

Type of outcome

Článek v odborném periodiku

Field of Study

50200 5.2 Economics and Business

Country of publisher

Serbia

Confidentiality degree

není předmětem státního či obchodního tajemství

References:

URL

RIV identification code

RIV/00216224:14560/16:00091356

Organization unit

Faculty of Economics and Administration

DOI

http://dx.doi.org/10.2298/EKA1610079S

Keywords in English

DSGE model;fscal policy;structural parameters;rational expectations;learning algorithm;real-time data;zero lower bound

Abstract

V originále

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.

Links

MUNI/A/1049/2015, interní kód MU

Name: Makroekonomická analýza chování ekonomiky a hospodářské politiky pomocí kvantitativních metod

Investor: Masaryk University, Category A

Files attached

427-1.pdf

Request the author's version of the file

Citovat

SLANICAY, Martin, Jan ČAPEK and Miroslav HLOUŠEK. SOME NOTES ON PROBLEMATIC ISSUES IN DSGE MODELS. Economic Annals. 2016, LXI, No 210, p. 79-100. ISSN 0013-3264. Available from: https://dx.doi.org/10.2298/EKA1610079S.

@article{1358183,
   author = {Slanicay, Martin and Čapek, Jan and Hloušek, Miroslav},
   article_number = {210},
   doi = {http://dx.doi.org/10.2298/EKA1610079S},
   keywords = {DSGE model;fscal policy;structural parameters;rational expectations;learning algorithm;real-time data;zero lower bound},
   language = {eng},
   issn = {0013-3264},
   journal = {Economic Annals},
   title = {SOME NOTES ON PROBLEMATIC ISSUES IN DSGE MODELS},
   url = {http://www.ekof.bg.ac.rs/wp-content/uploads/2016/10/427-1.pdf},
   volume = {LXI},
   year = {2016}
}

TY  - JOUR
ID  - 1358183
AU  - Slanicay, Martin - Čapek, Jan - Hloušek, Miroslav
PY  - 2016
TI  - SOME NOTES ON PROBLEMATIC ISSUES IN DSGE MODELS
JF  - Economic Annals
VL  - LXI
IS  - 210
SP  - 79-100
EP  - 79-100
SN  - 00133264
KW  - DSGE model;fscal policy;structural parameters;rational expectations;learning algorithm;real-time data;zero lower bound
UR  - http://www.ekof.bg.ac.rs/wp-content/uploads/2016/10/427-1.pdf
N2  - 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.
ER  -

SLANICAY, Martin, Jan ČAPEK and Miroslav HLOUŠEK. SOME NOTES ON PROBLEMATIC ISSUES IN DSGE MODELS. \textit{Economic Annals}. 2016, LXI, No~210, p.~79-100. ISSN~0013-3264. Available from: https://dx.doi.org/10.2298/EKA1610079S.

Detailed Information on Publication Record