The State of DSGE Modelling

Paul Levine ()

No 319, School of Economics Discussion Papers from School of Economics, University of Surrey

Abstract: This survey and assessment of the state of DSGE modelling is structured around six key criticisms levelled at the approach. The first is fundamental and common to macroeconomics and microeconomics alike - namely, problems with rationality and Expected Utility Maximization (EUM). The second is that DSGE models examine fluctuations about an exogenous balanced growth path and there is no role for endogenous growth. The third consists of a number of concerns associated with estimation. The fourth is another fundamental problem with any micro-founded macro-model - that of heterogeneity and aggregation. The fifth and sixth concerns focus on the rudimentary nature of earlier models that lacked unemployment and a banking sector.

JEL-codes: C11 C18 C32 E32 E47 E52 E62 E70 O44 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2019-01
New Economics Papers: this item is included in nep-dge, nep-hpe, nep-mac and nep-upt
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Persistent link: https://EconPapers.repec.org/RePEc:sur:surrec:0319

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