Introduction to DSGE models and Dynare
What you will learn
This video course provides an introduction to a very simple DSGE model and its implementation in Dynare. Topics like deriving model equations, computing the steady-state, calibrating model parameters and doing both deterministic as well as stochastic simulations are covered. Tips and tricks for making use of Dynare’s preprocessing capabilities, modularization of files and flipping of variables and parameters are presented.
In this video we derive the baseline Real Business Cycle (RBC) model with leisure and its implementation in Dynare. It also overviews and introduces basic features of Dynare’s preprocessor like workspace variables, global structures, dynamic vs. static model equations, Latex capabilities and model local variables.
In this video we focus on computing the steady-state of the RBC model both analytically and numerically. First, we derive the steady-state using pen and paper and then implement this using either an initval or steady_state_model block in Dynare. We also cover “helper functions” that introduce numerical optimization in an otherwise analytical steady_state_model block, in order to compute the steady-state for variables for which we cannot derive closed-form expressions by hand.
In this video I show how to calibrate the parameters of the RBC model in a sophisticated way using Dynare’s preprocessing capabilities. First, we cover some general ideas and tips how to calibrate the parameters of a DSGE model, focusing on the RBC model with leisure. Then I show how to accomplish this in Dynare either directly or, a more advanced way, by modularizing your mod file and changing the type of variables and parameters. Once you start working with large-scale models, this modularization technique will make your models much more tractable.
In this video I focus on simulations and discuss the difference between the deterministic and stochastic model framework of Dynare. I provide intuition how Dynare “solves” or “simulates” these different model frameworks and guidance on when to run either deterministic or stochastic simulations. Then I show how to simulate various scenarios in the baseline RBC model. In the deterministic case (i.e. under perfect foresight), this videos covers (i) unexpected or pre-announced temporary shocks, (ii) unexpected or pre-announced permanent shocks, (iii) return to equilibrium by using Dynare’s perfect_foresight_setup and perfect_foresight_solver (i.e. the old simul) commands and the shocks, initval, endval and histval blocks. I show what happens in MATLAB’s workspace and to Dynare’s output structure *oo_*. In the **stochastic** case, this videos covers (i) impulse-response-functions (irf), (ii) variance decompositions, (iii) theoretical vs. simulated moments, (iv) data simulation by using Dynare’s *stoch_simul* command and the *shocks* block. I show what happens in MATLAB’s workspace and to Dynare’s output structures *oo_* and *oo_.dr*. Lastly, the difference between Dynare’s *declaration* and *DR* (decision-rule) ordering of variables is covered.