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4 posts on "dynamic stochastic general equilibrium"
December 15, 2023

The New York Fed DSGE Model Forecast—December 2023

decorative illustration: chart and stock prices background.

This post presents an update of the economic forecasts generated by the Federal Reserve Bank of New York’s dynamic stochastic general equilibrium (DSGE) model. We describe very briefly our forecast and its change since September 2023. As usual, we wish to remind our readers that the DSGE model forecast is not an official New York Fed forecast, but only an input to the Research staff’s overall forecasting process. For more information about the model and variables discussed here, see our DSGE model Q & A.

Posted at 9:00 am in DSGE, Forecasting, Macroeconomics | Permalink
November 21, 2023

The New York Fed DSGE Model Perspective on the Lagged Effect of Monetary Policy

Decorative image: Factory workers on an assembly line with baseball caps on.

This post uses the New York Fed DSGE model to ask the question: What would have happened to interest rates, output, and inflation had the Federal Reserve been following an average inflation targeting (AIT)-type reaction function since 2021:Q2, when inflation began to rise—as opposed to keeping the federal funds rate at the zero lower bound (ZLB) until March 2022, and then raising it aggressively thereafter? We show that actual policy was more accommodative in 2021 than implied by the AIT reaction function and then more contractionary in 2022 and beyond. On net, the lagged effect of monetary policy on the level of GDP, when measured relative to the counterfactual, has been positive throughout the forecast horizon, due to the initial boost associated with keeping the fed funds rate near zero in 2021.

Posted at 7:01 am in DSGE, Monetary Policy | Permalink
August 10, 2023

The Evolution of Short‑Run r* after the Pandemic

Decorative: U.S. dollars and surgical masks in a still life.

This post discusses the evolution of the short-run natural rate of interest, or short-run r*, over the past year and a half according to the New York Fed DSGE model, and the implications of this evolution for inflation and output projections. We show that, from the model’s perspective, short-run r* has increased notably over the past year, to some extent outpacing the large increase in the policy rate. One implication of these findings is that the drag on the economy from recent monetary policy tightening may have been limited, rationalizing why economic conditions have remained relatively buoyant so far despite the elevated level of interest rates.

Posted at 7:00 am in DSGE, Macroeconomics, Monetary Policy | Permalink
August 21, 2019

Online Estimation of DSGE Models

Our macroeconomists explain their approach for parallel and “online” estimation of DSGE models using sequential Monte Carlo techniques and share a GitHub link for obtaining their SMC Julia code.

Posted at 7:00 am in DSGE, Macroeconomics | Permalink
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