This paper constructs a complete dynamic general equilibrium model of a macroeconomy that is similar in many respects to the IS/LM model that dominated the thinking of most macroeconomists for a generation. Unlike the IS/LM model all markets are modeled as in equilibrium at all points in time....

This paper presents the text of the annual John Flemming Memorial Lecture, given at the Bank of England on 16 October 2013. The views expressed are those of the author and do not represent those of the Bank or the Monetary Policy Committee

DSGE models are characterized by the presence of expectations as explanatory variables. To use these models for policy evaluation, the econometrician must estimate the parameters of expectation terms. Standard estimation methods have several drawbacks, including possible lack or weakness of...

Most dynamic stochastic general equilibrium models of the macroeconomy assume that labor is traded in a spot market. Two exceptions by David Andolfatto and Monika Merz combine a two-sided search model with a one-sector real business cycle model. These hybrid models are successful, in some...

This paper is about the properties of Markov switching rational expectations (MSRE) models. We present a simple monetary policy model that switches between two regimes with known transition probabilities. The first regime, treated in isolation, has a unique determinate rational expectations...