What is a DSGE model?
Matthew Martin 8/07/2014 11:32:00 PM
Lots of econ bloggers have alternatively cited DSGE models or criticized them in posts, but I've never actually seen any attempts to show the lay public what one looks like. My aim is to simply show you what a DSGE model looks like and how it is used in practice. This is not a dumbed-down explain-like-I'm-five post (perhaps that's for a future post, but this is the full unabridged model), nor is this a step-by-step guide to learning how to do DSGE modeling--I present just the model, nothing else. What follows is a DSGE calculator programmed with a log-linear approximation of a standard "Real Business Cycle" DSGE model with complete taxation, followed by a concise definition of the model and all the variables. How to use this calculator:
- Plug in whatever parameter values and tax rates you want into the "Control Panel."
- Set it to either compute an impulse response function (click the "impulse" button) or run a simulation (click the "simulation" button).
- If you want an impulse response function, you have to specify one or more shocks. When imputing shocks, remember that whole numbers equal percentage points, representing the percent change in that variable. Note that if the tax rate is zero, then a shock to it won't do anything.
- Click the "Calculate!" button.
|Parameters||Shocks||Tax Rates||Tax Shocks||Steady State|