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The Chicago Fed DSGE model

Author

Listed:
  • Scott Brave
  • Jeffrey R. Campbell
  • Jonas D. M. Fisher
  • Alejandro Justiniano

Abstract

The Chicago Fed dynamic stochastic general equilibrium (DSGE) model is used for policy analysis and forecasting at the Federal Reserve Bank of Chicago. This article describes its specification and estimation, its dynamic characteristics and how it is used to forecast the US economy. In many respects the model resembles other medium scale New Keynesian frameworks, but there are several features which distinguish it: the monetary policy rule includes forward guidance, productivity is driven by neutral and investment specific technical change, multiple price indices identify inflation and there is a financial accelerator mechanism.

Suggested Citation

  • Scott Brave & Jeffrey R. Campbell & Jonas D. M. Fisher & Alejandro Justiniano, 2012. "The Chicago Fed DSGE model," Working Paper Series WP-2012-02, Federal Reserve Bank of Chicago.
  • Handle: RePEc:fip:fedhwp:wp-2012-02
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    File URL: http://chicagofed.org/digital_assets/publications/working_papers/2012/wp2012_02.pdf
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    References listed on IDEAS

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    1. Alejandro Justiniano & Giorgio Primiceri & Andrea Tambalotti, 2011. "Investment Shocks and the Relative Price of Investment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 14(1), pages 101-121, January.
    2. Andrea Tambalotti & Andrea Ferrero & Vasco Curdia, 2010. "Evaluating Interest Rate Rules in an Estimated DSGE Model," 2010 Meeting Papers 402, Society for Economic Dynamics.
    3. Greenwood, Jeremy & Hercowitz, Zvi & Huffman, Gregory W, 1988. "Investment, Capacity Utilization, and the Real Business Cycle," American Economic Review, American Economic Association, vol. 78(3), pages 402-417, June.
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    Cited by:

    1. Binder, Michael & Lieberknecht, Philipp & Quintana, Jorge & Wieland, Volker, 2017. "Model Uncertainty in Macroeconomics: On the Implications of Financial Frictions," CEPR Discussion Papers 12013, C.E.P.R. Discussion Papers.
    2. Arias, Jonas E. & Erceg, Christopher & Trabandt, Mathias, 2016. "The macroeconomic risks of undesirably low inflation," European Economic Review, Elsevier, vol. 88(C), pages 88-107.
    3. Lindé, Jesper & Smets, Frank & Wouters, Rafael, 2016. "Challenges for Central Banks' Macro Models," CEPR Discussion Papers 11405, C.E.P.R. Discussion Papers.
    4. Nadav Ben Zeev & Christopher Gunn & Hashmat Khan, 2020. "Monetary News Shocks," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 52(7), pages 1793-1820, October.
    5. Giorgio Motta & Patrizio Tirelli, 2013. "Limited Asset Market Participation, Income Inequality and Macroeconomic Volatility," Working Papers 261, University of Milano-Bicocca, Department of Economics, revised Dec 2013.
    6. House, Christopher L. & Proebsting, Christian & Tesar, Linda L., 2020. "Austerity in the aftermath of the great recession," Journal of Monetary Economics, Elsevier, vol. 115(C), pages 37-63.
    7. Lindé, J. & Smets, F. & Wouters, R., 2016. "Challenges for Central Banks’ Macro Models," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 2185-2262, Elsevier.
    8. Mitsuru Katagiri, 2016. "Forward Guidance as a Monetary Policy Rule," Bank of Japan Working Paper Series 16-E-6, Bank of Japan.
    9. Jeffrey R. Campbell & Charles L. Evans & Jonas D.M. Fisher & Alejandro Justiniano, 2012. "Macroeconomic Effects of Federal Reserve Forward Guidance," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 43(1 (Spring), pages 1-80.
    10. Joshua Brault & Hashmat Khan, 2019. "The Real Interest Rate Channel is Structural in Contemporary New-Keynesian Models," Carleton Economic Papers 19-05, Carleton University, Department of Economics.
    11. Hess Chung & Edward Herbst & Michael T. Kiley, 2015. "Effective Monetary Policy Strategies in New Keynesian Models: A Reexamination," NBER Macroeconomics Annual, University of Chicago Press, vol. 29(1), pages 289-344.
    12. Takeshi Yagihashi, 2020. "DSGE Models Used by Policymakers: A Survey," Discussion papers ron333, Policy Research Institute, Ministry of Finance Japan.
    13. Jesper Lindé, 2018. "DSGE models: still useful in policy analysis?," Oxford Review of Economic Policy, Oxford University Press, vol. 34(1-2), pages 269-286.
    14. Sacha Gelfer, 2019. "Data-Rich DSGE Model Forecasts of the Great Recession and its Recovery," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 32, pages 18-41, April.
    15. Francesco Sergi, 2020. "The Standard Narrative about DSGE Models in Central Banks’ Technical Reports," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 27(2), pages 163-193, March.

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    Keywords

    Keynesian economics; Forecasting; Stochastic analysis;
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