DSGE Models and Central Banks

Camilo Tovar ()

No 2008-30, Economics Discussion Papers from Kiel Institute for the World Economy (IfW Kiel)

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.

Keywords: DSGE models; Central Banks; Communication; Estimation; Modelling (search for similar items in EconPapers)
JEL-codes: B4 C5 E0 E32 E37 E50 E52 E58 F37 F41 F47 (search for similar items in EconPapers)
Date: 2008
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac and nep-mon
References: Add references at CitEc
Citations: View citations in EconPapers (86)

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http://www.economics-ejournal.org/economics/discussionpapers/2008-30
https://www.econstor.eu/bitstream/10419/27466/1/dp2008-30.pdf (application/pdf)

Related works:
Journal Article: DSGE Models and Central Banks (2009)
Working Paper: DSGE models and central banks (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwedp:7406

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