Beyond the DSGE straightjacket

Mohammad Pesaran and Ronald Smith

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: Academic macroeconomics and the research department of central banks have come to be dominated by Dynamic, Stochastic, General Equilibrium (DSGE) models based on micro-foundations of optimising representative agents with rational expectations. We argue that the dominance of this particular sort of DSGE and the resistance of some in the profession to alternatives has become a straitjacket that restricts empirical and theoretical experimentation and inhibits innovation and that the profession should embrace a more flexible approach to macroeconometric modelling. We describe one possible approach.

JEL-codes: C1 E1 (search for similar items in EconPapers)
Date: 2011-04-13
New Economics Papers: this item is included in nep-cba, nep-ecm and nep-hpe
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Citations: View citations in EconPapers (6)

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Related works:
Working Paper: Beyond the DSGE Straitjacket (2011)
Working Paper: Beyond the DSGE Straitjacket (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:cam:camdae:1138

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