Dynamic stochastic general equilibrium (DSGE) models
A)are based on nonlinear specifications
B)combine traditional models with real business cycle models and price stickiness models
C)have to be solved by computers using simulation techniques
D)are used by some central banks as a forecasting tool
E)all of the above

Question

Quizplus · Accepted Answer

DSGE models are nonlinear specifications that combine traditional models with real business cycle models and price stickiness models. Due to their complexity, DSGE models have to be solved using simulation techniques on computers. DSGE models are used by some central banks as a forecasting tool, as they provide a framework for analyzing the impact of various economic policies on macroeconomic outcomes.

Dynamic Stochastic General Equilibrium (DSGE) Models