The Standard Narrative about DSGE Models in Central Banks’ Technical Reports

Sergi, Francesco

doi:10.1080/09672567.2019.1651365

Cited by 19 publications

(6 citation statements)

References 83 publications

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“…Before the Federal Open Market Committee meets to make policy decisions, all participants are given copies of the so-called Tealbook, which includes parts A and B. 11 Tealbook A contains a summary and analysis of recent economic and financial developments in the United States and foreign economies, as well as the staff's economic forecast. The staff also provides model-based simulations of a number of alternative scenarios highlighting upside and downside risks.…”

Section: How Are Dsge Models Used In Policy Institutions?mentioning

confidence: 99%

On DSGE Models

Christiano¹,

Eichenbaum²,

Trabandt

2018

Journal of Economic Perspectives

177

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The outcome of any important macroeconomic policy change is the net effect of forces operating on different parts of the economy. A central challenge facing policymakers is how to assess the relative strength of those forces. Economists have a range of tools that can be used to make such assessments. Dynamic stochastic general equilibrium (DSGE) models are the leading tool for making such assessments in an open and transparent manner. We review the state of mainstream DSGE models before the financial crisis and the Great Recession. We then describe how DSGE models are estimated and evaluated. We address the question of why DSGE modelers—like most other economists and policymakers—failed to predict the financial crisis and the Great Recession, and how DSGE modelers responded to the financial crisis and its aftermath. We discuss how current DSGE models are actually used by policymakers. We then provide a brief response to some criticisms of DSGE models, with special emphasis on criticism by Joseph Stiglitz, and offer some concluding remarks.

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Section: How Are Dsge Models Used In Policy Institutions?mentioning

confidence: 99%

On DSGE Models

Christiano¹,

Eichenbaum²,

Trabandt

2018

Journal of Economic Perspectives

177

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“…19 And unlike the primarily non-quantitative theory-centric papers from 30 years ago, most contemporary research involves building models that can be taken to the data. Moreover, quantitative theory-centric research has increasingly utilized computationally intensive methods, made possible by breathtaking gains in computing power (Sergi, 2017) and the development of powerful, easy-to-use software, such as Dynare.…”

Section: Discussion and Concluding Remarksmentioning

confidence: 99%

Macroeconomic Research, Present and Past

Glandon¹,

Kuttner²,

Mazumder³

et al. 2022

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How is macroeconomic research conducted and what is it trying to accomplish? We explore these questions using information gleaned from 1,894 articles published in ten leading journals. We find that over the past 40 years there has been a growing emphasis on increasingly sophisticated quantitative theory, such as DSGE modeling, and papers employing these methods now account for the majority of articles in macro journals. The shift towards quantitative theory is mirrored by a decline in the use of econometric methods to test economic hypotheses. Econometric techniques borrowed from applied microeconomics have to a large extent displaced time series methods, and empirical papers increasingly rely on micro and proprietary data sources. Market imperfections are pervasive, and the amount of research involving financial frictions has increased significantly in the past ten years. The frequency with which non-macro JEL codes appear in macro articles indicates a great deal of overlap between macroeconomics and other fields.

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“…On the other hand, the confrontation between intellectual traditions, especially within economics, and even most notably within macroeconomics, are relevant for central banks. A key example is the academic dynamic of a "new neoclassical synthesis" (Goodfriend and King, 1997), producing a theoretical framework at the crossing between different intellectual traditions (notably the "new classical" and the "new Keynesian" one); the engagement of central banks with this framework explains the emergence of "DSGE models" (Sergi, 2020). Finally, the characteristics of local academic communities and, in particular, national communities, create specific conditions for interaction between academia and central banks.…”

Section: Central Banks As "Boundary Organizations"mentioning

confidence: 99%

Redefining Scientisation: Central Banks between Science and Politics

Goutsmedt,

Sergi

2024

Preprint

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This article introduces a new conceptual framework for examining the transformation of central banks’ activities at the intersection of science and politics. The article relies on the results of four historical case studies gathered by the special issue “The Scientization of Central Banks. National Patterns and Global Trends”—to which this article provides also an introduction.We start with an analysis of Martin Marcussen’s concept of “scientization”, originally formulated to describe the changes within central banks since the 2000s. After highlighting how Marcussen’s concept has raised different interpretations, we broaden our scope to examine how “scientization” is applied in the wider social sciences, extending beyond the study of central banks. This brings to the fore two ideas: scientization as “boundary work”(redrawing the line between “science” and “non-science”) happening both in the public-facing (“frontstage”) and internal (“backstage”) activities of organizations.Finally, we suggest how these two ideas can be used to reinterpret “scientization” of central banks as the emergence of central banks as “boundary organizations”. This reframing allows us to untangle and clarify the phenomena previously conflated under the original concept of scientization, offering a more coherent framework for ongoing research on central banks.

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The Standard Narrative about DSGE Models in Central Banks’ Technical Reports

Cited by 19 publications

References 83 publications

On DSGE Models

On DSGE Models

Macroeconomic Research, Present and Past

Redefining Scientisation: Central Banks between Science and Politics

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