Building from scratch models and then using them to forecast the behaviors of the real economy
A banal point made recently by frenchy la pew Bonaparte
- The specific role of DSGEs in the panoply of general equilibrium models is to provide a basic macroeconomicMeccano set, i.e. a formal, analytical platform for discussion and integration of new elements: for example, as a base from which to explore the role of bargaining in the labor market, the role of price-setting in the goods markets, the role of banks in intermediation, the role of liquidity constraints on consumption, the scope for multiple equilibria, etc. Some seem to think that it is a dangerous and counterproductive dream, a likely waste of time, or at least one with a high opportunity cost. I do not. I believe that aiming for such a structure is desirable and achievable.
