The identification of reduced-form VAR model had been the subject of numerous debates in the literature. Different sets of identifying assumptions can lead to very different conclusions in the policy debate. This paper proposes a theoretical consistent identification strategy using restrictions implied by a DSGE model. Monte Carlo simulations suggest the proposed identification strategy is succ...

I characterize cyclical fluctuations in the cross-sectional dispersion of firm-level productivity. Using the micro-estimated dispersion, or “risk,” stochastic process as an input to a baseline DSGE financial accelerator model, I assess how well the model reproduces cyclical movements in both real and financial conditions of the economy. In the model, risk shocks calibrated to micro data lead to...

This paper builds a small open economy dynamic stochastic general equilibrium (DSGE) model for Indonesia with state-dependent pricing (SDP) and studies its implications policy analysis. Variations in the extensive margin of price adjustment under SDP are shown to non-trivially affect model-generated variance decompositions impulse responses various shocks. DSGE model-based analyses conducted wi...

Most dynamic stochastic general equilibrium models (DSGE) of the macroeconomy assume that labor is traded in a spot market. Two exceptions (Andolfatto [3], Merz [11]) combine the two-sided search model of Mortenson and Pissarides, [14], [13], [15] with a one-sector real business cycle model. These hybrid models are successful, in some dimensions, but they cannot account for observed volatility ...

Real Expectations: Replacing Rational Expectations with Survey Expectations in Dynamic Macro Models Jeff Fuhrer Abstract: This paper examines the implications of changing the expectations assumption that is embedded in nearly all current macroeconomic models. The paper substitutes measured or “real” expectations for rational expectations in an array of standard macroeconomic relationships, as w...