DSGEModellen

DSGEmodellen, short for Dynamic Stochastic General Equilibrium models, are a class of macroeconomic models used to analyze how an economy evolves over time under uncertainty. They blend microfoundations with aggregate outcomes by modeling optimizing households and firms connected through prices and markets, all embedded in a dynamic, stochastic environment. The framework typically includes households maximizing intertemporal utility, firms choosing production and prices, a monetary authority or fiscal policy, and sometimes a foreign sector. Time is usually discrete, and shocks to technology, preferences, policy, or external conditions are introduced as random processes. Equilibrium in a DSGE model requires that markets clear in every period, linking individual decisions to macro aggregates such as output, inflation, employment, and consumption.

Variants range from Real Business Cycle (RBC) models to New Keynesian (NK) models that incorporate nominal rigidities and policy rules. Solving a DSGE model involves deriving its decision rules and solving for the state of the economy, typically by linearizing around a steady state or using nonlinear numerical methods. Parameters are commonly calibrated or estimated from data, with Bayesian techniques frequently employed. Policy analysis uses impulse-response functions and counterfactual simulations to evaluate how policy changes or shocks propagate through the economy.

DSGEmodellen are used by central banks, research institutes, and universities for forecasting, policy evaluation, and understanding macroeconomic dynamics. Critics point to strong assumptions, sensitivity to calibration or priors, and challenges in representing financial markets and distributional effects. Nevertheless, the class remains a central tool in contemporary macroeconomics for coherent, theory-based analysis of economic policy and business cycle dynamics.