Fat Tailed DSGE Models: A Survey and New Results

Chetan Dave and Marco Sorge ()
Additional contact information
Marco Sorge: University of Salerno

No 2023-3, Working Papers from University of Alberta, Department of Economics

Abstract: We review recent advances in dynamic stochastic general equilibrium theory concerned with the emergence of fat tailed time series distributions. Focusing on mechanisms that are firmly grounded in structural equilibrium models, we provide a common reference framework to organize existing contributions according to whether they entail extreme business cycle swings as an endogenous response to small and short-lived shocks ('thin in, fat out'), or rather as an automatic consequence of large and/or heteroskedastic exogenous impulses ('fat in, fat out'). Within the former class, non-Gaussian features of equilibrium patterns can endogenously emerge in fully rational, Gaussian environments. Using an empirically plausible real business cycle framework, we also report novel simulation-based evidence that helps reconcile theoretical predictions with the documented higher-order properties of time-series data for output measures.

Keywords: non-Gaussian distributions; fat tails; DSGE models; minimum distance estimation (search for similar items in EconPapers)
JEL-codes: E30 E40 E70 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2023-02-28
New Economics Papers: this item is included in nep-dge and nep-ets
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://sites.ualberta.ca/~econwps/2023/wp2023-03.pdf Full text (application/pdf)

Related works:
Journal Article: Fat‐tailed DSGE models: A survey and new results (2025)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ris:albaec:2023_003

Access Statistics for this paper

More papers in Working Papers from University of Alberta, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Joseph Marchand ().