Tuesday, July 28, 2009

Forecasting with DSGE models

Dynamic Stochastic General Equilibrium (DSGE) models are designed to do policy analysis. They are based on microfoundations and calibrated or estimated to provide quantitative answers to policy scenarios and in particular study environments for which there is no historical precedent. These model are not designed for forecasting, traditional statistical tools, where ad-hoc models with minimal

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