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A big and embarrassing challenge to DSGE models (Dynamic Stochastic General Equilibrium) is Alex Tabarrok’s latest post at Marginal Revolution. Tabarrok comments on a paper that finds two problems with new-Keynesian DSGE modeling. One is that this model/technique cannot predict real-world data very well. Put differently, when we ask DSGE not to forecast but to […]

Fifteen years of stringent regulatory requirements and gloomy macroeconomic conditions have taken a toll on bank profitability, especially in Europe. But lately, a new wave of optimism is spreading over the global banking sector. At first glance, bankers have at least one good reason to be cheerful again. Since July 2022, the European Central Bank lifted interest […]

In late April 2023, United States National Security Advisor Jake Sullivan disclosed the new global economic guidelines that the current administration would pursue during its remaining months and, if secured, the next term. In contrast with the past, the guidelines’ creators believe that free market-recipes are no longer good enough to respond to the challenges […]

On September 9-10, the G20 summit took place in India, giving the leaders of the world’s largest economies the chance to meet in a relatively informal setting. Established in 1999, the Group of 20 initially aimed to coordinate global economic activity, with a strong ambition to centralize decision-making on a global scale. It maintains a close partnership […]

The original version of this post is co-authored with Emilio Ocampo. In 1976, the renowned economist Robert Lucas (1937-2023) introduced a thought-provoking paper that reshaped economic analysis. Lucas argued against relying solely on historical data to predict the outcomes of changes in economic policy, particularly when dealing with aggregate variables like consumption and investment. According to […]