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Abstract

Vol. 62, No. 1, pp. 66-93 (2011)

“Dynamic General Equilibrium Model--A Survey with the Application to the Japanese Macroeconomic Date--”
Ippei Fujiwara (Financial Markets Department, Bank of Japan), Toshiaki Watanabe (Institute of Economic Research, Hitotsubashi University)

One of the most widely used models for macroeconomic analysis is the dynamic stochastic general equilibrium (DSGE) model. This article provides a comprehensive survey for this model. In the first half, we explain the development of this model and some methods for solving this model under rational expectations. In the latter half, we explain Markov chain Monte Carlo (MCMC) and Bayesian methods, which have recently been used for the estimation of DSGE model. We also explain the DSGE-VAR model used for the evaluation of DSGE model. Using Japanese macroeconomic data prior to the period of zero interest rate policy, we estimate a simple New Keynesian DSGE model and evaluate it using the DSGE-VAR model.