Much Ado about the DSGE Model
7 Pages Posted: 27 Jun 2015
Date Written: June 24, 2015
Abstract
This paper proves that DSGE model by Kydland, Prescott and Plosser is the repetition of an earlier calculation procedure advocated by Solow, and that its “prediction” is nothing but tautology. Tautology reproduces the original parameters and data, and its fit is naturally perfect, but tautology provides nothing new and cannot predict the future. The label DSGE is too exaggerated.
Keywords: General Equilibrium
JEL Classification: D51
Suggested Citation: Suggested Citation
Choi, Hak, Much Ado about the DSGE Model (June 24, 2015). Available at SSRN: https://ssrn.com/abstract=2622838 or http://dx.doi.org/10.2139/ssrn.2622838
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