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How accounting accuracy affects DSGE models

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  • Kim, Minseong

Abstract

This paper explores how accounting consistency affects DSGE models. As many DSGE models descended from real business cycle models, I explore a simple labor-only RBC model with an exogenous external sector introduced. The conclusion reached in this paper is that once an external sector is introduced, DSGE models may suffer from accounting inconsistency, unless disequilibrium or some non-orthodox theory of price level, real monetary supply or bonds is accepted.

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  • Kim, Minseong, 2016. "How accounting accuracy affects DSGE models," MPRA Paper 70404, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:70404
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    File URL: https://mpra.ub.uni-muenchen.de/71266/1/MPRA_paper_71266.pdf
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    References listed on IDEAS

    as
    1. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
    2. Galí, Jordi, 2020. "The effects of a money-financed fiscal stimulus," Journal of Monetary Economics, Elsevier, vol. 115(C), pages 1-19.
    3. Frank Smets & Rafael Wouters, 2007. "Shocks and Frictions in US Business Cycles: A Bayesian DSGE Approach," American Economic Review, American Economic Association, vol. 97(3), pages 586-606, June.
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    Cited by:

    1. Kim, Minseong, 2016. "The perils of first-order conditions of New Keynesian models," MPRA Paper 70753, University Library of Munich, Germany.

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    More about this item

    Keywords

    accounting consistency; DSGE; external sector; fiscal deficit;
    All these keywords.

    JEL classification:

    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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