DSGE Models and Central Banks
By C. Tovar. 2009
253 citations recorded by the source corpus.
Abstract Over the past 15 years there has been remarkable progress in the specification and estimation of dynamic stochastic general equilibrium (DSGE) models. Central banks in developed and emerging market economies have become increasingly interested in their usefulness for policy analysis and forecasting. This paper reviews some issues and challenges surrounding the use of these models at central banks. It recognises that they offer coherent frameworks for structuring policy discussions. Nonetheless, they are not ready to accomplish all that is being asked of them. First, they still need to incorporate relevant transmission mechanisms or sectors of the economy; second, issues remain on how to empirically validate them; and finally, challenges remain on how to effectively communicate their features and implications to policy makers and to the public. Overall, at their current stage DSGE models have important limitations. How much of a problem this is will depend on their specific use at central banks.
Subfields: Economics and Econometrics
View Paper: https://www.semanticscholar.org/paper/b6d285077e1c24cfcd68197f0654c6b7ad697d88
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In Economics and Econometrics
Citations in the corpus
- Estimation of ergodic agent-based models by simulated minimum distance (2015, background): “11See Canova (2007), Tovar (2008) and Fernández-Villaverde (2010) for an introduction. for the steady state values of the observables (the policy functions) must be expressed as a Markov chain –the so-called state space representation– where the aggregate state of the system at any time period…”
- Macroprudential Policy - A Literature Review (2012, unknown): “As noted by Trichet (2009), there appears to be a shift in favor of the adoption of some form of leaning against the wind both in the policy debate and in the academic literature.”
- Time-varying monetary-policy rules and financial stress: Does financial instability matter for monetary policy? (2011, background): “…develop an NK DSGE model with credit frictions to evaluate the performance of alternative policy rules that are 2 The survey of this literature is provided by Tovar (2009). augmented by a response to credit spreads and to aggregate the volume of private credit in the face of different shocks.”