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Understanding DSGE models

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  • Celso Jose Costa Junior

Abstract

While the theoretical development of DSGE models is not overly difficult to understand, practical application remains somewhat complex. The literature on this subject has some significant obscure points. This book can be thought of, firstly, as a tool to overcome initial hurdles with this type of modeling. Secondly, by showcasing concrete applications, it aims to persuade incipient researchers to work with this methodology. In principle, this is not a book on macroeconomics in itself, but on tools used in the construction of this sort of models. It strives to present this technique in a detailed manner, thereby providing a step by step course intended to walk readers through this otherwise daunting process. The book begins with a basic Real Business Cycle model. Subsequently various frictions are gradually incorporated into a standard DSGE model imperfect competition; frictions in prices and in wages ; habit formation; non-Ricardian agents; adjustment cost in investment; costs of not using the maximum installed capacity; and finally, Government.

Suggested Citation

  • Celso Jose Costa Junior, 2016. "Understanding DSGE models," Vernon Press Titles in Economics, Vernon Art and Science Inc, edition 1, number 70, July.
    • Handle: RePEc:vpr:ecbook:70
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    2. Vasilev, Aleksandar, 2020. "A business-cycle-model with monopolistically-competitive firms and Calvo wages: Lessons for Bulgaria (1999-2018)," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, issue Early Cit.
    3. Valdivia Coria, Joab Dan & Valdivia Coria, Daney David, 2019. "Microfundaments of a Monetary Policy Rule, Poole's Rule," MPRA Paper 95489, University Library of Munich, Germany.
    4. Sumei Luo & Guangyou Zhou & Jinpeng Zhou, 2021. "The Impact of Electronic Money on Monetary Policy: Based on DSGE Model Simulations," Mathematics, MDPI, vol. 9(20), pages 1-26, October.
    5. Haykaz Igityan & Hovhannes Manukyan, 2020. "Fitting Armenian Data to the Simple DSGE Model with Permanent Productivity Growth," Working Papers 14, Central Bank of the Republic of Armenia.
    6. Vasilev Aleksandar, 2018. "Optimal Fiscal Policy with Utility-Enhancing Government Spending, Consumption Taxation and a Common Income Tax Rate: The Case of Bulgaria," Review of Economics, De Gruyter, vol. 69(1), pages 1-16, April.
    7. José Alves, 2018. "A DSGE Model to Evaluate the Macroeconomic Impacts of Taxation," Working Papers REM 2018/62, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    8. Vasilev, Aleksandar, 2018. "Is consumption-Laffer curve hump-shaped? The VAT evasion channel," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 45(3), pages 598-609.
    9. Takyi, Paul Owusu & Leon-Gonzalez, Roberto, 2020. "Macroeconomic impact of fiscal policy in Ghana: Analysis of an estimated DSGE model with financial exclusion," Economic Analysis and Policy, Elsevier, vol. 67(C), pages 239-260.
    10. Vasilev, Aleksandar, 2016. "Is consumption-Laffer curve hump-shaped? The role of VAT evasion," EconStor Preprints 147001, ZBW - Leibniz Information Centre for Economics.
    11. Valdivia Coria, Joab Dan & Valdivia Coria, Daney David, 2019. "Microfundamentos de una Regla de Política Monetaria, Regla de Poole [Microfundaments of a Monetary Policy Rule, Poole's Rule]," MPRA Paper 93854, University Library of Munich, Germany.
    12. Vasilev, Aleksandar, 2018. "A business-cycle-model with monopolistically-competitive intermediary firms and sticky nominal wages: the case of Bulgaria after the introduction of the currency board (1999-2016)," EconStor Preprints 175183, ZBW - Leibniz Information Centre for Economics.

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