Hi all researchers,

Are the DSGE models is one of the econometric methods?

Regards

So there is a difference between models and methods, right? DSGE, AS-AD, IS-LM, Solow, OLG, Taylor rule, etc are all **models** of the following generic form: y_t = f(b, x_t, e_t). That is, exogenous x_t and/or residuals/shocks (e_t) explains endogenous y_t (ignoring model specific complexities like lags, etc), and b contains the parameters of the model.

We can now estimate parameters b of any model using econometrics **methods**. OLS, GMM, VAR, VECM, Bayesian methods, etc are econometrics methods that can be used to estimate economic models.

For example, we can use econometric methods like OLS or GMM to estimate parameters in a Taylor rule, or parameters in a reduced-form AS-AD or IS-LM model.

Same way, we can use econometric methods like GMM or Bayesian methods to estimate the parameters of a DSGE model.

So **DSGE is not an econometrics method**, it is an economic model (like OLG, IS-LM, AS-AD models) which can be estimated with econometric methods.

Indeed. Let me add one more thing: DSGE models like any economic model will impose restrictions on the parameter values based on economics. Econometric models will be completely silent on this.

Thank you so much @kofiemma and @jpfeifer,

I was inspired by the following phrase (Kydland and Prescott, 1982): â€śfurther advances are needed before formal econometric methods can be fruitfully applied to testing this theory of aggregate fluctuationsâ€ť.

What that quote meant is: you could employ formal econometric tests to the early RBC models at hand, but they always rejected the very simple models (see also In Praise of Calibration - Econlib). So they argued, we need more sophisticated models to better capture that data.

Great

Very clear