Talk:Dynamic stochastic general equilibrium

Microfoundations

I found the following description of the DSGE model microfoundations at the Italian Treasury site. I'd like to add them to the article, would be great if someone reviewed them. Alaexis_¿question? 08:16, 1 January 2019 (UTC)

Dsge and Lucas critique

From the text in this article, one gets the impression that the criticism from Lucas makes this kind of modeling unsatisfactory due to the decision-making having to be preset. I find that this is not necessary true and that a more flexible model having the ability to balance and reset the decision-making criteria during the simulation process is not only possible but most desirable so that the program is more able to be realistic.Macrocompassion (talk) 09:48, 27 October 2020 (UTC)

Definition needed in intro

The article starts by saying what DSGE is used for, but not what it is. It needs to start with a brief definition in the first sentence. I don't know enough about the subject to define it, so must leave it to others. Something like

DSGE is a macroeconomic method. Earlier models were essentially static; DSGE is a way of modelling the economy that is dynamic, taking into account demand, supply, and the monetary policy equation using statistical methods. DSGE is often employed by monetary and fiscal authorities for policy analysis ...

but better. Best wishes, Pol098 (talk) 11:16, 30 May 2022 (UTC)

Additional workhorse models that deserve highlighting

I agree with the suggestion to add a section on recent developments including the proliferation of heterogeneous agents models, the importance of micro data to discipline models, and machine learning methods for model solutions, and Bayesian methods to estimate DSGE models.

I also think that while the real business cycle (RBC) model remains a core building block for many DSGE models, several other workhorse models also deserve prominence.

The overlapping generations (OLG) model a la Samuelson and Diamond is valuable because it admits dynamic inefficiency and equilibrium indeterminacy. Bewley‑Hugett‑Aiyagari heterogeneous agents models, which feature incomplete markets and uninsurable idiosyncratic risk, are essential for analyzing limited risk‑sharing and redistribution. The Krusell‑Smith model builds on this by adding aggregate uncertainty and demonstrates how computational methods have progressed to overcome the curse of dimensionality.

Finally, the Diamond‑Mortensen‑Pissarides search‑and‑matching framework introduced a new way to think about coordination frictions and congestion externalities—ideas that extend beyond labor markets and bring game‑theoretic bargaining concepts into macroeconomics.

Most successful theory papers in the post-Lucas critique world can trace their building blocks to at least one of these models. Quant-macro (talk) 23:18, 6 February 2026 (UTC)