What Is DSGE?
Dynamic stochastic general equilibrium (DSGE) is a macroeconomic model that facilitates macroeconomic analysis and policy making in central banks, as well as government and nongovernmental organizations (NGOs). DSGE models, such as the European Central Bank’s Smets-Wouters framework, perform time-based macroeconomic general equilibrium analysis of interactions between economic variables.
Common tasks for central bank economists to develop and analyze DSGE models and create fan charts include:
- Running estimations and computing the steady state of nonlinear models
- Applying Bayesian statistical techniques
- Performing general equilibrium modeling