Lars Syll — Microfounded DSGE models are not only unrealistic — they are also plainly wrong

The DSGE model is a model in which output is determined in the labour market as in New Classical models and in which aggregate demand plays only a very secondary role, even in the short run.

In addition, given the fundamental philosophical problems presented for the use of DSGE models for policy simulation, namely the fact that a number of parameters used have completely implausible magnitudes and that the degree of freedom for different parameters is so large that DSGE models with fundamentally different parametrization (and therefore different policy conclusions) equally well produce time series which fit the real-world data, it is also very hard to understand why DSGE models have reached such a prominence in economic science in general. — Sebastian Dullien

Microfounded DSGE models are not only unrealistic — they are also plainly wrong
Lars P. Syll | Professor, Malmo University