Understanding Dsge Models - (Vernon Economic Methodology) by Celso Jose Costa Junior (Paperback)

About the Book

Covers the essentials in understanding Dynamic Stochastic General Equilibrium (DSGE) models It begins with a basic Real Business Cycle model and gradually adds: imperfect competition; frictions in prices and wages; habit formation; non-Ricardian agents; adjustment cost in investment; of not using maximum installed capacity; and Government.

Book Synopsis

While the theoretical development of DSGE models is not overly difficult to understand, practical application remains somewhat complex. The literature on this subject has some significant obscure points. This book can be thought of, firstly, as a tool to overcome initial hurdles with this type of modeling. Secondly, by showcasing concrete applications, it aims to persuade incipient researchers to work with this methodology. In principle, this is not a book on macroeconomics in itself, but on tools used in the construction of this sort of models. It strives to present this technique in a detailed manner, thereby providing a step by step course intended to walk readers through this otherwise daunting process. The book begins with a basic Real Business Cycle model. Subsequently various frictions are gradually incorporated into a standard DSGE model: imperfect competition; frictions in prices and in wages; habit formation; non-Ricardian agents; adjustment cost in investment; costs of not using the maximum installed capacity; and finally, Government.

Review Quotes

"The Microfoundations, Intertemporal Decisions and Uncertainty is the center of modern macroeconomics, like Real Business Cycles Model and New Keynesian Model. The book Understanding DSGE written by Professor Costa Junior has the intention to introduce this literature to begin research, where some details about the elaboration of the model studied step by step. This type of approach is not found in other books that analyze this type of models. "The book's strong point is the determination of the State-Steady and its linearization in detail and how to put the equilibrium condition in the Dynare." Armando Vaz Sampaio - Adjunct Professor at Federal University of Paraná. "This book teaches DSGE models from scratch. It explains the basic economic relations behind the models; discusses their assumptions; derives the results step by step; presents computer codes that solve each model covered in the book; and shows the results. The book will appeal to students, scholars and professionals interested in acquaint themselves with modern macroeconomics and to those searching for a detailed guide for solving DSGE models." Bernardo Guimarães Sao Paulo School of Economics - FGV