Introduction to DSGE Models Quiz

What are the two main phases of DSGE Models?

• Real Business Cycle (RBC) and New-Keynesian (NK)

• Structural Vector Autoregression Models (SVAR) and DSGE

• Dynamic and Stochastic

• Equilibrium and Models

What is the aim of DSGE models?

• To estimate deep parameters which are policy invariant

• To predict the effects of changes in economic policies

• To replicate stylised facts observed in real data

• To simulate synthetic data

What is the main difference between CGE and DSGE models?

• CGE operates in a deterministic environment while DSGE is stochastic

• CGE includes more variables than DSGE

• CGE is used for fiscal policy while DSGE is for monetary policy

• CGE models are simpler than DSGE models

What does DSGE stand for?

• Dynamic Stochastic General Equilibrium

• Deterministic Stochastic General Equilibrium

• Dynamic Structural General Equilibrium

• Dynamic Stochastic General Economics

What are the three perfectly competitive markets in a DSGE model?

• Labour, consumption, and bond markets

• Labour, product, and financial markets

• Consumption, investment, and product markets

• Labour, investment, and goods markets

What is the role of households in a DSGE model?

• They own the firms and supply labour

• They produce goods and services

• They manage monetary policy

• They regulate the markets

What is the significance of rational expectations in DSGE models?

• It ensures that agents make optimal decisions based on available information

• It allows for random shocks in the model

• It simplifies the model structure

• It eliminates the need for deep parameters

What is the purpose of using Lagrangians in dynamic optimization?

• To obtain First Order Conditions (FOCs)

• To simplify the model structure

• To estimate deep parameters

• To analyze policy scenarios

Can you work out the FOCs?

Which point should we do the approximation about?