Title
How applicable are the new Keynesian DSGE models to a typical low-income economy?
Author
Faculty/Department
Faculty of Applied Economics
Publication type
report
Publication
Antwerp :UA, [*]
Subject
Economics
Source (series)
Research paper / UA, Faculty of Applied Economics ; 2011:016
Volume/pages
65 p.,
Carrier
E
Target language
English (eng)
Affiliation
University of Antwerp
Abstract
This paper assesses the applicability of new Keynesian DSGE models to low income economies similar to those in Sub Saharan Africa. To this e¤ect, we …rst review the development, criticisms and recent advances in DSGE modeling. Then we assess the implications that emanate from the assumptions of the standard small open economy New Keynesian DSGE model within the context of the economic environment of a typical low income economy. Our assessment shows the following two points. First, though there are many criticisms to these models, most recent advances seem to have addressed most of them. However, there are still some outstanding criticisms that seriously challenge not only the DSGE models but also all conventional economic models. Second, the current tendency of applying these models to explain or predict economic phenomena in low income countries without incorporating the structural speci…cities of these countries cannot be justi…ed. Instead, for these models to be helpful to understand the economic events in low income countries, most of their components must be changed or modi…ed. In this study we identify some of these components and suggest the possible changes or modi…cations.
Full text (open access)
https://repository.uantwerpen.be/docman/irua/37896d/6e3b1a79.pdf
Handle