CSH Talk by Michael Miess: “Economic forecasting with DSGE models – an evaluation and critique”

The lecture by Michael Miess from the Vienna University of Business and Economics will take place at the Complexity Science Hub Vienna in Room 201.

If you are interested in participating, please email to office@csh.ac.at

Abstract

New Keynesian Dynamic Stochastic General Equilibrium (NK-DSGE) models with numerous real and nominal frictions have become the standard theory-based model for economic forecasting. To explain the origins of these models in general equilibrium theory, this talk will give an overview of the theory and assumptions behind NK-DSGE models. Secondly, it will explain how these models are taken to the data using Bayesian estimation techniques, and present results of a forecast evaluation exercise with a two-country NK-DSGE model for Austria and the Euro Area. Lastly, the lecture reflects on the continued use and apparent success of NK-DSGE models in economic forecasting, despite widespread critique of their underlying theory and the way Bayesian estimation is conducted in a DSGE context.