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Do DSGE Models Have a Future?

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  • Olivier Blanchard

    () (Peterson Institute for International Economics)

Abstract

Dynamic stochastic general equilibrium (DSGE) models have come to play a dominant role in macroeconomic research. Some see them as the sign that macroeconomics has become a mature science, organized around a microfounded common core. Others see them as a dangerous dead end. This Policy Brief argues that the current DSGE models are seriously flawed, but they are eminently improvable and central to the future of macroeconomics. To improve, however, they have to become less insular, by drawing on a much broader body of economic research. They also have to become less imperialistic and accept to share the scene with other types of general equilibrium models.

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  • Olivier Blanchard, 2016. "Do DSGE Models Have a Future?," Policy Briefs PB16-11, Peterson Institute for International Economics.
    • Handle: RePEc:iie:pbrief:pb16-11
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    File URL: https://piie.com/publications/policy-briefs/do-dsge-models-have-future
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