We examine solutions in which neither player is worse off from the leadership of one in a policy maker-public game. The loop model of dynamic games is used. Outcome space is dotted with equivalence classes of solutions. The Dynamic Stochastic General Equilibrium (DSGE) results and their New Keynesian variants might represent one category. The economy is the neighborhood of a market-clearing equ...

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...

In this paper, I argue that applied monetary policy analysis is hard. In particular, all of our models are grossly deficient relative to the ideal, and this cannot be corrected in the medium term. This view has important implications for answering the Simsian question of whether any given change in policy analysis methods is progress or regress. As an application of these ideas, I assess the po...

The Great Recession seems to be a natural experiment for macroeconomics showing the inadequacy of the predominant theoretical framework — the New Neoclassical Synthesis — grounded on the DSGE model. In this paper, we present a critical discussion of the theoretical, empirical and political-economy pitfalls of the DSGE-based approach to policy analysis. We suggest that a more fruitful research a...

YADA (Yet Another Dsge Application) is a Matlab program for Bayesian estimation and evaluation of Dynamic Stochastic General Equilibrium and vector autoregressive models. This paper provides the mathematical details for the various functions used by the software. First, some rather famous examples of DSGE models are presented and all these models are included as examples in the YADA distributio...