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Saturday, June 29, 2013

'DSGE Models and Their Use in Monetary Policy'

Mike Dotsey at the Philadelphia Fed:

DSGE Models and Their Use in Monetary Policy: The past 10 years or so have witnessed the development of a new class of models that are proving useful for monetary policy: dynamic stochastic general equilibrium (DSGE) models. The pioneering central bank, in terms of using these models in the formulation of monetary policy, is the Sveriges Riksbank, the central bank of Sweden. Following in the Riksbank’s footsteps, a number of other central banks have incorporated DSGE models into the monetary policy process, among them the European Central Bank, the Norge Bank (Norwegian central bank), and the Federal Reserve.
This article will discuss the major features of DSGE models and why these models are useful to monetary policymakers. It will indicate the general way in which they are used in conjunction with other tools commonly employed by monetary policymakers. ...

    Posted by on Saturday, June 29, 2013 at 12:24 AM in Economics, Macroeconomics, Methodology | Permalink  Comments (11)

          


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