In this document we lay out the microeconomic foundations of a dynamic stochastic general equilibrium model, called Policy Analysis Tool Applied to Colombian Needs (PATACON), designed as a forecast tool and as a guide to advise monetarypolicy authorities in Colombia. In companion documents we...

Theory-consistent models have to be kept small to be tractable. If they are to forecast well, they have to condition on data that are unmodelled, noisy, patchy and about the future. Agents can also use these data to form their own expectations. In this paper we illustrate a scheme for jointly...