Cookies?
Library Header Image
LSE Research Online LSE Library Services

The scientific foundation of dynamic stochastic general equilibrium (DSGE) models

de Grauwe, Paul (2010) The scientific foundation of dynamic stochastic general equilibrium (DSGE) models. Public Choice, 144 (3-4). pp. 413-443. ISSN 0048-5829

Full text not available from this repository.

Identification Number: 10.1007/s11127-010-9674-x

Abstract

DSGE-models provide a coherent framework of analysis. This coherence is brought about by restricting acceptable behavior of agents to dynamic utility maximization and rational expectations. The problem of the DSGE-models (and more generally of macroeconomic models based on rational expectations) is that they assume extraordinary cognitive capabilities of individual agents. In addition, these models need a lot of ad-hoc assumptions to make them fit the data. I argue that we need models that take into account the limited cognitive abilities of agents. One can introduce rationality in such models by assuming “trial and error“ learning. I propose such a model and I analyze its implications.

Item Type: Article
Official URL: http://www.springerlink.com/content/100332/
Additional Information: © 2010 Springer
Divisions: European Institute
Subjects: H Social Sciences > HB Economic Theory
JEL classification: E - Macroeconomics and Monetary Economics > E1 - General Aggregative Models > E13 - Neoclassical
E - Macroeconomics and Monetary Economics > E1 - General Aggregative Models > E17 - Forecasting and Simulation
E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E30 - General
Date Deposited: 05 Oct 2012 14:20
Last Modified: 24 Mar 2024 04:30
URI: http://eprints.lse.ac.uk/id/eprint/46610

Actions (login required)

View Item View Item