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KDI 경제교육·정보센터

ENG
  • 경제배움
  • Economic

    Information

    and Education

    Center

최신자료
Modeling the economy as a watch or as a cloud. How do these models predict the effects of supply shocks?
CEPR
2024.11.20
We argue that the mainstream macroeconomic models (DSGE-models) are models that operate like “watches”, while behavioural macroeconomic models operate like “clouds”. We define what this means. We contrast the predictions these two simple canonical macroeconomic models make about the transmission of supply shocks. We find that in the cloud model the fog surrounding the transmission of these shocks is much denser than in the watch model, making it difficult to make conditional forecasts.