Doubts and Responses on Dynamic Stochastic General Equilibrium Theory:On the Contributions of Chinese Scholars
There are many disputes on the dynamic stochastic general equilibrium(DSGE)which once caused bias among cross-disciplinary scholars.This paper combs the doubts on DSGE and the logic behind them in detail and responds to them one by one,discerning the objective disadvantages of and correcting the prejudices against this method.The basic viewpoints of this paper are as below:DSGE model plays a main role in analyzing the reaction mechanism of the macroeconomy to various shocks,rather than forecasting;DSGE model is still a reasonable tool for analyzing macroeconomic policies,though it has some defects in model recognition,micro basis,and heterogeneity analysis;the"small but precise"models cannot fully replace the role of DSGE model in understanding the operation mechanism of the macroeconomy.Finally,after summarizing the application of DSGE model in China and the contributions of Chinese scholars,we suggest the main direction of China's DSGE studies in the future.
DSGE ModelThe Micro Foundation of MacroeconomicsLucas CritiqueRational Expectation
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