Media Coverage Jun 2014
Why DSGEs crash during crises
Many central banks rely on dynamic stochastic general equilibrium models – known as DSGEs to cognoscenti. This column argues that the models’ mathematical basis fails when crises shift the underlying distributions of shocks.
Professor David Hendry, Director, Economic Modelling, The Institute for New Economic Thinking at the Oxford Martin School writes on the failure of dynamic stochastic general equilibrium models during crises.