Why Does No-One Teach Undergraduate Macroeconomics Using the Dynamic Stochastic General Equilibrium Model?

Abstract

This paper argues that it is no surprise that the DSGE model, which has proved so successful in convincing academic economists of its value, has made relatively few inroads into the teaching sphere. The qualities which make it attractive to academics, such as the purity of its assumptions and its sound microeconomic basis, have little resonance with undergraduate students. Instead, the qualities of the neo-Keynesian model, such as its ability to incorporate ‘real-world’ institutional features and the ease with which it can be used to develop higher order skills and applications, prove much more attractive.

JEL Classification: A22, E20