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Beyond DSGE Models: Toward an Empirically Based Macroeconomics

Author

Listed:
  • Dave Colander
  • Peter Howitt
  • Alan Kirman
  • Axel Leijonhufvud
  • Perry Mehrling

Abstract

This paper argues that macro models should be as simple as possible, but not more so. Existing models are “more so” by far. It is time for the science of macro to step beyond representative agent, DSGE models and focus more on alternative heterogeneous agent macro models that take agent interaction, complexity, coordination problems and endogenous learning seriously. It further argues that as analytic work on these scientific models continues, policy-relevant models should be more empirically based; policy researchers should not approach the data with theoretical blinders on; instead, they should follow an engineering approach to policy analysis and let the data guide their choice of the relevant theory to apply.

Suggested Citation

  • Dave Colander & Peter Howitt & Alan Kirman & Axel Leijonhufvud & Perry Mehrling, 2008. "Beyond DSGE Models: Toward an Empirically Based Macroeconomics," Middlebury College Working Paper Series 0808, Middlebury College, Department of Economics.
  • Handle: RePEc:mdl:mdlpap:0808
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    File URL: http://www.middlebury.edu/services/econ/repec/mdl/ancoec/0808.pdf
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    References listed on IDEAS

    as
    1. Howitt, Peter, 2006. "Coordination Issues in Long-Run Growth," Handbook of Computational Economics, in: Leigh Tesfatsion & Kenneth L. Judd (ed.), Handbook of Computational Economics, edition 1, volume 2, chapter 35, pages 1605-1624, Elsevier.
    2. Leigh Tesfatsion & Kenneth L. Judd (ed.), 2006. "Handbook of Computational Economics," Handbook of Computational Economics, Elsevier, edition 1, volume 2, number 2.
    3. Leigh Tesfatsion, 2002. "Agent-Based Computational Economics," Computational Economics 0203001, University Library of Munich, Germany, revised 15 Aug 2002.
    4. Marco Del Negro & Frank Schorfheide, 2004. "Priors from General Equilibrium Models for VARS," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(2), pages 643-673, May.
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    More about this item

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General

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