Macroeconomic Modeling : A Gentle Introduction to DSGE Models

Bridging the gap between undergraduate and graduate macroeconomics, this text introduces dynamic stochastic general equilibrium (DSGE) models from a unified perspective of equilibrium theory, and then provides the methods used to solve the models. Utilizing Dynare, it helps students compute models and solve real-world problems.

Bridging the gap between undergraduate and graduate macroeconomics, this book approaches DSGE models from a unified perspective based on the concept of competitive equilibrium (CE) and the equivalent social planner problem (SPP). Equilibrium conditions derived from a CE are used to motivate the methods that solve the models. A guided focus on Dynare enables students to solve problems while avoiding the typical pitfalls associated with the software. The approach is 'we have a need and here's a tool that solves it' instead of 'here's a tool and let's look for an application.' It is consistent with current practices: define an equilibrium, characterize its solution, find its steady state, approximate the equilibrium conditions, and solve for its policy functions. This book is for the student who wants to follow current macroeconomic research and build on that to gain a competitive edge in creating and solving empirical models with real-world applicability.