Much Ado about the DSGE Model

7 Pages Posted: 27 Jun 2015

See all articles by Hak Choi

Hak Choi

Chienkuo Technology University - Department of International Business; Chung-Hua Institution for Economic Research

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

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

Hak Choi (Contact Author)

Chienkuo Technology University - Department of International Business ( email )

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Chung-Hua Institution for Economic Research ( email )

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