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Strucural change and DSGE models

Author

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  • Michel Juillard

Abstract

In most existing DSGE models, parameters are supposed constant and exogenous shocks have zero mean. This makes difficult to treat structural change and anticipated effects of future reforms. Introducing dummy variables in the DSGE model can only handle unexpected changes. This papers deals with upcoming changes supposed to be known, at least to some extend, by all agents such as, for example, demographic change or adhesion to the euro in European accessing countries. The modelling device used in the paper is to introduce future values of deterministic exogenous variables among state variables upon which agents make their decision. Illustration of the procedure is provided for simulation with approximations at order 1 and 2 and for estimation of linear approximations.

Suggested Citation

  • Michel Juillard, 2004. "Strucural change and DSGE models," Computing in Economics and Finance 2004 191, Society for Computational Economics.
  • Handle: RePEc:sce:scecf4:191
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    More about this item

    Keywords

    structural change; DSGE models;

    JEL classification:

    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications

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