Macroeconomics
2011-10-17 — 2011-10-17
Wherein the Study of Aggregate Economies Is Surveyed, and the Poor Performance of Dynamic Stochastic General Equilibrium Model Forecasts Against Observed Outcomes Is Documented.
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Dynamic stochastic general equilibrium models and their forecasts
Studies have shown that the forecasts from dynamic stochastic general equilibrium models perform better than central banks’ judgmental forecasts as well as forecasts based on statistical analysis but without a theoretical foundation. This column shows that performing better is hardly good performance given how badly all three forecasts compare with reality.
The unfortunate uselessness of most state-of-the-art academic monetary economics
Dynamic Stochastic General Equilibrium Models in Macroeconomics