What you will learn in the DSGE course

In this course, I  will teach you how to calibrate and estimate DSGE models in Matlab-Dynare. DSGE models are macro-microfounded models which focus on growth and business cycles. As the world of macroeconomics continues to evolve, Dynamic Stochastic General Equilibrium (DSGE) models are becoming increasingly popular. Yet getting familiar with DSGE models and the software Dynare without guidance can be challenging. Unfortunately, there aren't many didactic courses available to help individuals navigate this complex subject and those that do exist come with a hefty price tag (yes, thousands of dollars). It can be discouraging and overwhelming at times, but don't despair! I am here to tell you that help is available, and it doesn't have to cost you an arm and a leg.

I have created this course specifically for individuals seeking guidance on this complex subject.

In this course, I show you step by step how to manually solve a simple RBC model and then how to calibrate it in Dynare. No previous knowledge of the software is required! I will walk you through each part of the process with clear explanations. You'll get to understand the fundamentals of how a model works and gain insight into what goes on behind the scenes when calibrating a model. But that's not all!

Now that we are all familiar with the structure of the basic model, let us explore how we can expand it by introducing oil into the production function. By doing so, we will be able to gain a deeper insight into sources of fluctuation in economies around the world. Adding oil to the model will help us better understand how changes in its availability and price can affect households and firms alike.

We conclude the course by estimating the simple RBC model. I will show you not only how to calibrate a model, but also, the commands you need to know to bring data into the software and estimate it.

If you are new to Dynare and DSGE models, you may feel overwhelmed by all the new information. Never fear though, because I am confident that this course can help you get a handle on it all. This course is tailored for beginners and those who don't have any prior experience with the software, so it should be a great place to start. However, it may not be suitable for advanced MATLAB users.

Solve step-by-step the DSGE model

In this course, I will show you step-by -step how to set up the simple RBC model and solve it manually . In our economy, firms and households' will interact with each other to produce output, consume, work, rest and invest in capital. The model is inspired on Prescott (1986) and, King & Rebelo (1999).

Write and estimate the DSGE model in the software

After having manually solved the RBC model, we will write step-by-step the dynamic equations in Matlab-Dynare and solve the model. I will teach you the diverse command to calibrate and estimate DSGE models. We will talk about the different post-estimation statistics.

Impulse Response Function in DSGE Models (IRFS)

Learn how to display and analyze impulse response functions (IRF's). Impulse responses show the response of state variables and observable variables to the exogenous structural shocks. In our model, the shock comes from the productivity of the firms (At). When the productivy of the firms increase, the demand for inputs increase. Consequently labor supply and consumption increase.

Let's add a new source of fluctuation in the DSGE Model: Oil

We begin the course by solving a simple RBC model. Next, you will have the knowledge to move one step forward! We will add a new source of fluctuation in the economy. Oil Shocks. We will add oil as an input in the firms' production function and we will add an equation for the oil supply. We will manually solve the model and then solve it in Dynare. When oil supply increases, oil prices decrease. Yet, when there is a demand shock, oil prices will increase. Learn how to solve this interesting model!

Last Step: bring data to the DSGE model

The first two models (simple RBC, and oil model) are calibrated. In other words, we are not using any real data in the model. Now, let's wrap up this course by bringing real data. I will show you how to import a dataset into Dynare and how to declare the observable variables. I will show you the commands you need to know to estimate the model using real data. For our example, we will estimate the simple RBC model using real data for the output cycle. In the picture, you can see that the impulse response functions of estimated models have confidence bands (while fully calibrated models don't). 

The DSGE course includes