|
on Investment |
| By: | Duong Trinh (University of Graz, Austria); Tatiana Santiago Montoya-Blandón (University of Glasgow, United Kingdom) |
| Abstract: | This paper introduces a new econometric framework for modeling social interactions with heterogeneous peer responses, addressing endogenous link formation. Our Selection corrected Heterogeneous Spatial Autoregressive (SCHSAR) approach jointly models link formation and outcome determination. We incorporate a finite mixture structure to capture heterogeneity in peer effects and account for unobserved individual-specific factors driving both network formation and outcome equations, addressing network endogeneity for credible estimation of heterogeneous spillover effects. We propose a fully Bayesian data augmentation approach for estimation and inference, overcoming challenges posed to standard likelihood-based methods. A simulation study validates our approach. Our empirical application to an innovation network among U.S. firms reveals significant positive, yet heterogeneous, peer effects on corporate R&D investments, after accounting for endogenous network formation. The findings highlight a variety of firm responses to exogenous R&D policy shocks and we quantify firm-level direct and spillover effects, offering valuable insights for evidence-based targeted policy design. |
| Keywords: | Bayesian inference, Social-spatial interaction, Finite mixture models, Heterogeneous peer effects, Network formation, R&D investment |
| JEL: | C11 C31 C51 D85 O32 |
| URL: | https://d.repec.org/n?u=RePEc:grz:wpaper:2026-24 |
| By: | James Horton (Methodist University, Charles M. Reeves School of Business and Economics) |
| Abstract: | Rochon and Rossi (2026) argue that neoclassical economics should no longer be taught to undergraduates. Their argument is based on the premise that neoclassical foundations are flawed and the empirical record is weak. I grant several of their empirical criticisms and reject the pedagogical conclusion they draw from them. A macroeconomic framework offers immense value to students when economists still disagree about it and when it offers explanations of important economic episodes that students can evaluate against historical evidence. It does not have to have been judged correct. Where those disagreements remain open, removing one side from the curriculum transfers adjudication from the student to the instructor. That same argument applies to heterodox frameworks when economists are still arguing over them. Rochon and Rossi's proposal also sits in tension with their call for a more empirical economics education, since empirical reasoning requires competing explanations against which evidence can be interpreted. |
| Keywords: | Economics education, Curricular pluralism, Macroeconomics teaching, Economic methodology, Neoclassical economics, Heterodox economics |
| JEL: | A22 B41 B50 |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:mtd:wpaper:004 |
| By: | Jorge Armando Rodríguez; Mario García; Martha Sánchez; Norman Maldonado |
| Abstract: | This paper summarizes a report with the same title prepared for the Bogota’s Department of the Treasury. The report examines the evolution of the location of economic activity in Bogota and Cundinamarca since 1990, especially as regards industry, and looks into the likely effects of local taxation and local public expenditure on industrial location choice between the two jurisdictions. |
| Keywords: | Regional economic activity; industrial location; local government finance; taxes; Public expenditure |
| JEL: | R12 H73 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:col:000176:023710 |
| By: | Mohamed Amir Omezzine (EESC-GEM - Grenoble Ecole de Management) |
| Abstract: | Adaptive quizzes are increasingly used to individualize practice in digital learning, but IS research still under-specifies how AI-driven adaptivity regulates student effort during task performance. This paper addresses that gap by proposing the Cognitive Elasticity Model, which explains learning engagement as depending not only on challenge-skill balance or cognitive load alone, but on the learner's capacity to remain within a productive effort zone as task demands shift. Grounded in Flow Theory and Cognitive Load Theory, the model positions adaptive quizzing as a system-level mechanism for regulating effort over time rather than only improving assessment efficiency. The study examines this claim through a three-condition experiment with 180 students: a Moodle adaptive quiz using Bayesian Knowledge Tracing, a non-adaptive Moodle quiz with identical items and timing, and an equivalent paper-based quiz. Cognitive load and flow are assessed primarily through phase-level self-report measures. These are complemented by EEG-derived indicators, including the Cognitive Load Score (CLS) for workload regulation and theta/alpha markers associated with flow-related engagement, while physiological strain is assessed through repeated ECG-based mean heart rate snapshots interpreted conservatively as indicators of stress-related arousal rather than direct readouts of internal states. |
| Abstract: | Les quiz adaptatifs sont de plus en plus utilisés pour individualiser la pratique dans les environnements d'apprentissage numérique. Cependant, la recherche en systèmes d'information explique encore insuffisamment la manière dont l'adaptativité pilotée par l'IA régule l'effort des étudiants pendant la réalisation d'une tâche. Cet article répond à cette limite en proposant le modèle d'élasticité cognitive. Ce modèle considère que l'engagement dans l'apprentissage ne dépend pas seulement de l'équilibre entre défi et compétence, ni du niveau de charge cognitive pris isolément, mais de la capacité de l'étudiant à maintenir son effort dans une zone productive lorsque les exigences de la tâche évoluent. |
| Date: | 2026–05–20 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05789341 |
| By: | Kaicheng Chen; Hugo Freeman |
| Abstract: | We study inference on common slope parameters in linear panel models with two-way unobserved heterogeneity. In linear regression, bias arises from unobserved heterogeneity that is shared between the residual and the covariates. Our common unobserved heterogeneity (CUH) estimator targets this common variation directly: it searches over functionals of the residualised outcome for variation that also resides in the covariates, and seeks to further project out only bias-inducing variation. This makes the estimator less sensitive to weak outcome factors while avoiding the complete removal of exogenous variation in covariates that is unrelated to the confounding heterogeneity. We develop a weak-factor theory based on a singular-value strength index and establish $\sqrt{NT}$-asymptotic normality of the cross-fitted CUH estimator. Under homoskedastic errors, its asymptotic variance is no larger than that of a common correlated effects factor estimator. Simulations and empirical applications illustrate the resulting bias--variance trade-off and the gains from selectively removing common variation. |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2610.25589 |
| By: | Jessica Ordemann |
| Abstract: | Previous literature has mainly focused on either income trajectories of higher education graduates in working life or in retirement. This paper advances this literature by investigating the inequalities of income trajectories at the transition into retirement and compare the trajectories to other educational graduates for the case of Germany. While cumulative advantage theory suggests that education-based income inequalities widen throughout working life, the institutional design of the German pension system fundamentally alters these trajectories. Using data from 1, 741 (11, 740 observations) baby boomers from the German Socio-Economic Panel Study (SOEP) I combine descriptive income trajectories with fixed effects regression and replacement rate analysis. I find a stratified pattern by educational degree in pre- and post-retirement income. However, income inequality by education degree is more pronounced during work life than in retirement: At the transition into retirement income differences are compressed relative to pre-retirement disparities. This compression operates through heterogeneous replacement rates. Higher educated individuals have lower replacement rates than the rest of the educational groups. Germany’s contribution-capped statutory pension system therefore constitutes a structurally induced erosion of the income advantage that higher education generates over a working lifetime. |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:diw:diwsop:diw_sp1243 |
| By: | Bossong, Raphael; Koch, Anne; Molla, Zefitret Abera |
| Abstract: | Die EU-Rückführungsverordnung schafft eine Rechtsgrundlage dafür, Personen, gegen die eine rechtskräftige Ausreiseanordnung ergangen ist, in aufnahmebereite Drittstaaten zu überstellen, auch wenn sie zu diesen Staaten keinerlei vorherige Verbindung haben. Die Einrichtung sogenannter Rückkehrzentren wird damit zu einer realistischen Option. Politisch sind diese attraktiv: Sie bieten Regierungen eine Möglichkeit, auf besonders sichtbare Weise Durchsetzungsfähigkeit zu demonstrieren - zu einem Zeitpunkt, an dem die Glaubwürdigkeit des gerade erst in Kraft getretenen EU-Migrations- und Asylpakets davon abhängt, dass seine neuen Verfahren in der Praxis funktionieren. Politische Sichtbarkeit ist jedoch nicht mit operativer Wirksamkeit gleichzusetzen. Präzedenzfälle aus Europa und die jüngere US-Praxis sprechen dafür, dass Überstellungen in entfernte Drittstaaten auf wenige Fälle beschränkt, teuer und von fragilen Absprachen abhängig bleiben dürften. Als zusätzliches Instrument könnten Rückkehrzentren allenfalls für eine kleine Gruppe besonders schwer rückführbarer Personen relevant sein; eine allgemeine Antwort auf niedrige Rückkehrquoten sind sie nicht. Ihr Nutzen sollte daran gemessen werden, ob sie rechtmäßige und tragfähige Ergebnisse ermöglichen, die sich mit den bestehenden Instrumenten der Rückkehrpolitik nicht erzielen lassen. |
| Keywords: | EU-Rückführungsverordnung, Rückkehrzentren, EU-Migrations- und Asylpaket, Rückkehrpolitik, Ausreiseanordnung, Rückkehransordnung, Rückführungsanordnung, Drittstaatsabschiebung, Übernahmevereinbarung, Gemeinsames Europäisches Asylsystem, GEAS, Refoulement, Ruanda, UK, Vereinigtes Königreich, Italien, Albanien, EU-Türkei-Erklärung |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:swpakt:344117 |
| By: | David Jiwon Hong (PRISM Sorbonne - Pôle de recherche interdisciplinaire en sciences du management - UP1 - Université Paris 1 Panthéon-Sorbonne) |
| Abstract: | Les avatars sont des vecteurs centraux de présence et d'interaction dans les mondes virtuels en réalité virtuelle (VR). Cette étude analyse leur rôle dans le management des impressions et la sensation de présence lors de réunions hebdomadaires en VR au sein d'une PME française. En mobilisant la théorie de l'activité, nous identifions cinq contradictions principales : limitations de personnalisation, expressivité réduite, différences d'incarnation entre participants, problèmes logistiques et asymétries de visibilité. Ces tensions, propre au contexte professionnel étudié, révèlent que l'avatar est un médiateur structurant les dynamiques identitaires et interactionnelles dans les mondes virtuels. L'avatar n'est donc pas un simple outil de représentation. Nos résultats montrent que la capacité à gérer son image à travers son avatar dépend fortement des contraintes techniques et organisationnelles et que cette perturbation entraîne une limitation du sentiment de présence, pourtant recherchée dans ces environnements virtuels |
| Date: | 2026–05–20 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05789312 |
| By: | Francesco Leghissa |
| Abstract: | Italian monetary policy remained subordinated to public financing between the 1960s and the euro, deficits being routinely accommodated through monetary base creation. This paper asks whether that configuration amounted to a non-Ricardian regime in the sense of the Fiscal Theory of the Price Level. Bivariate VARs, a structural-cyclical decomposition of the primary balance addressing the observational equivalence critique, and a three-variable variance decomposition all yield Ricardian-like dynamics. Yet the structural primary balance behaved as a near-autonomous process, satisfying the definition of active fiscal policy. I characterise this as a hybrid regime, latent fiscal dominance within a Ricardian outcome, sustained by the central bank’s dual role as fiscal accommodator and market coordinator. The 1981 divorce dismantled that architecture progressively rather than triggering a regime switch: fiscal contributions to monetary base variance fell from 93 to at most 48 per cent, a transition the Annual Reports show was completed only under Maastricht. |
| Keywords: | fiscal theory of the price level; fiscal dominance; Bank of Italy–Treasury divorce; monetary-fiscal interaction; VAR. |
| JEL: | E52 E62 E63 H63 N14 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:ise:remwps:wp04302026 |
| By: | Jonathan Piaget (HES-SO - Haute École spécialisée de Suisse occidentale = HES-SO University of Applied Sciences and Arts Western Switzerland = Fachhochschule Westschweiz [Schweiz]); Ulysse Rosselet (HES-SO - Haute École spécialisée de Suisse occidentale = HES-SO University of Applied Sciences and Arts Western Switzerland = Fachhochschule Westschweiz [Schweiz]); Cédric Gaspoz (HES-SO - Haute École spécialisée de Suisse occidentale = HES-SO University of Applied Sciences and Arts Western Switzerland = Fachhochschule Westschweiz [Schweiz]) |
| Abstract: | This article explores the LLM-as-a-Judge paradigm as a critical Information System (IS) whose reliability and neutrality are crucial factors for its organizational adoption. The study confirms the robustness of self-preference and highlights a massive position bias, indicating that the judgment is more sensitive to form and provenance than to intrinsic quality. This preference of LLM-judges for synthetic content reveals a risk of stylistic misalignment with human standards. The presence of these structural biases constitutes a major impediment to trust and adoption. Explicit and continuous bias measurement, along with the integration of diversified, blind, and human-calibrated evaluation pipelines, are essential to ensure reliable deployment. |
| Abstract: | Cet article explore le paradigme LLM-juge comme Système d'Information (SI) critique dont la fiabilité et la neutralité sont déterminantes pour son adoption organisationnelle. L'étude confirme la robustesse de l'auto-préférence et met en évidence un biais de position massif, indiquant que le jugement est plus sensible à la forme et à la provenance qu'à la qualité intrinsèque. Cette préférence des LLM-juges pour le contenu synthétique révèle un risque de désalignement stylistique par rapport aux standards humains. La présence de ces biais structurels constitue un frein majeur à la confiance et à l'adoption. Une mesure explicite et continue des biais, ainsi que l'intégration de pipelines d'évaluation diversifiés, aveugles et calibrés par l'humain, sont essentiels pour assurer un déploiement fiable |
| Date: | 2026–05–20 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05789338 |
| By: | Ben Kim; Tucker Smith; Kei-Mu Yi |
| Abstract: | The U.S. average tariff rate increased from 2.9 percent in January 2025 to 14.8 percent in December, a rise of almost 12 percentage points. The surge—the largest such U.S. jump since the Smoot-Hawley tariffs at the onset of the Great Depression in 1930—led to a sharp increase in the tariff-inclusive prices that U.S. importers paid. |
| Date: | 2026–10–06 |
| URL: | https://d.repec.org/n?u=RePEc:fip:d00001:103911 |
| By: | Andrés Rodríguez-Pose; Ali Glisson |
| Abstract: | This paper examines the territorial reconfiguration of American electoral politics since the 1980s, tracing the remaking of Republican support from Reagan’s 1984 landslide to Trump’s three presidential campaigns (2016, 2020, 2024). Drawing on panel data for every presidential election from 1984 to 2024 across 722 commuting zones, we test whether regional development traps, defined as enduring economic underperformance, explain both the shift from Democrats to Republicans and the Republicans’ internal realignment. Mundlak/Correlated Random Effects estimates show backlash is overwhelmingly driven by structural, not cyclical, decline. Short-term economic fluctuations do not predict Republican swing, while long-run territorial position does so decisively. Voters are not responding to recessions. They are registering alienation from an economic order that has failed their communities for a generation. Trump’s gains concentrated in places persistently left behind, whose peripheral position has become entrenched. |
| Keywords: | Regional development traps; electoral geography; Republican Party; Trump; Reagan coalition; voting; territorial inequality; political realignment; United States |
| JEL: | D72 R11 R12 P16 O18 |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:egu:wpaper:2623 |
| By: | Maria Jose Talayero Schettino (Center for Global Development); Caroline Mallory (Center for Global Development) |
| Abstract: | Lead exposure remains a major but underrecognized threat to children’s health and development globally. In 2018, the Republic of Georgia became the first country to include blood lead level (BLL) testing in UNICEF’s Multi-Indicator Cluster Survey, revealing that 41 percent of children aged two to seven had BLLs above the World Health Organization’s threshold of 5 µg/dL, with no child testing at zero. This case study was built on 20 semi-structured interviews with government, international, nongovernmental, and academic stakeholders, alongside a review of published evidence to document Georgia’s response: building domestic laboratory capacity, identifying adulterated spices as a major source of exposure, and enforcing existing food safety laws, and creating a national surveillance program. Follow-up data shows substantial declines in BLL, though 15 to 20 percent of children remain above the threshold. Georgia’s example shows what is possible once lead exposure becomes a political priority. |
| Date: | 2026–10–01 |
| URL: | https://d.repec.org/n?u=RePEc:cgd:ppaper:405 |
| By: | Aditya Aladangady; Jesse Bricker; Andrew C. Chang; Sarena Goodman; Gina Li |
| Abstract: | Informal support networks, the interpersonal connections through which families provide or receive financial and practical assistance, constitute a critical but often invisible component of the U.S. economy. These networks can serve many of the same functions as wealth: shaping key economic decisions around saving, spending, and labor supply and providing an important buffer against adverse shocks (McGarry 2016; Bergeot et al., 2025). |
| Date: | 2026–10–09 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgfn:103910 |
| By: | Tomasz Kopczewski (University of Warsaw, Faculty of Economic Sciences); Iana Okhrimenko (Lazarski University in Warsaw, Department of Econometrics); Jan Lisicki (University of Warsaw, Faculty of Economic Sciences) |
| Abstract: | Economics rewards precision, but precision within a model does not establish what a result means, whether the represented object is economically admissible, or whether the conclusion travels to the world. This methodological essay builds a classroom prank on the Indian parable of the blind men and the elephant. Students solve slightly different calibrations of a two-sector Leontief model, reduce the answers to policy signs and vote; every system is solvable, yet thirty of the hundred coefficient pairs fail the Hawkins–Simon productivity condition. Six blind men extend the lesson to calculation, point equilibrium, binary inference, identification, aggregation and computational dynamics. In each case the well-behaved statistic is not the one that answers the economic question, and its good behaviour is what makes it persuasive. Artificial intelligence lowers the cost of building alternative models towards zero; the scarce input is the disposition to ask what a successful result is not showing. |
| Keywords: | economic methodology, model instability, Hawkins–Simon condition, statistical significance, classroom demonstration |
| JEL: | A22 B41 C12 C63 C67 D51 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:war:wpaper:2026-39 |
| By: | Zina Douar (MRM-SI - Montpellier Research in Management - Systèmes d’Information - MRM - Montpellier Research in Management - UPVD - Université de Perpignan Via Domitia - UM - Université de Montpellier); Isabelle Bourdon (MRM-SI - Montpellier Research in Management - Systèmes d’Information - MRM - Montpellier Research in Management - UPVD - Université de Perpignan Via Domitia - UM - Université de Montpellier); Philippe Cohard (MRM-SI - Montpellier Research in Management - Systèmes d’Information - MRM - Montpellier Research in Management - UPVD - Université de Perpignan Via Domitia - UM - Université de Montpellier); Philippe Chapellier (MRM-CS - Montpellier Research in Management - Comptabilités et Société - MRM - Montpellier Research in Management - UPVD - Université de Perpignan Via Domitia - UM - Université de Montpellier) |
| Abstract: | The expansion of digital technologies and the growth of data have fostered the emergence of Data-Driven Business Models (DDBMs), that is, business models based on the exploitation of data. Although several studies have already examined the links between the Internet of Things (IoT) and business models, the literature still tends to address this issue in a fragmented way, often within specific sectoral contexts, rather than through empirical analyses examining, within a single case, the role of data generated by connected objects alongside other sources of digital data in the evolution of a DDBM. This study therefore raises the following question: How do IoT-generated data contribute to the progressive evolution of a Data-Driven Business Model in a service SME? To address this question, we conducted a case study of LBEC, a French SME whose service is based on IoT devices. We analyze how these data intervene in the three components of the business model: value proposition, value architecture, and revenue model. The findings show that IoT data mainly contribute to service monitoring, reliability, and continuity, while application data play a greater role in adjusting the offer and understanding usage patterns. This study thus provides further insight into the contribution of IoT data to the progressive evolution of a Data-Driven Business Model. |
| Abstract: | L'expansion des technologies numériques et la croissance des données ont favorisé l'émergence des Data-Driven Business Models (DDBM), c'est-à-dire des modèles d'affaires fondés sur l'exploitation des données. Bien que plusieurs travaux aient déjà étudié les liens entre l'Internet des objets (IoT) et les business models, la littérature traite encore le plus souvent cette question de manière dispersée, souvent dans des contextes sectoriels spécifiques, plutôt que sous la forme d'analyses empiriques examinant, au sein d'un même cas, le rôle des données issues des objets connectés par rapport à d'autres sources de données numériques dans l'évolution d'un DDBM. Cette recherche pose donc la question suivante : Comment les données issues de l'IoT contribuent-elles à l'évolution progressive d'un Data- Driven Business Model dans une PME de services ? Pour y répondre, nous avons réalisé une étude de cas auprès de l'entreprise LBEC, une PME française dont le service repose sur des dispositifs IoT. Nous analysons comment ces données interviennent dans les trois composantes du business model : la proposition de valeur, l'architecture de valeur et le modèle de revenus. Les résultats montrent que les données IoT contribuent principalement à la supervision, à la fiabilisation et à la continuité du service, tandis que les données applicatives soutiennent davantage l'ajustement de l'offre et la compréhension des usages. Cette recherche apporte ainsi un éclairage sur le rôle des données IoT dans l'évolution progressive d'un Data-Driven Business Model. |
| Keywords: | Data-Driven Business Models, Internet of Things, IoT data, Business model evolution, évolution du modèle d’affaire, données IoT, Internet des objets |
| Date: | 2026–05–20 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05789332 |
| By: | Ioannis Kasparis (University of Cyprus) |
| Abstract: | Existing regression inference methods for nonstationary heavy tailed data are largely limited to unit roots tests. Functional central limit theorems (FCLTs), which are commonly used for the asymptotic analysis of nonstationary models, are inapplicable to nonstationary data characterized by a memory parameter $d |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2610.25237 |
| By: | Alberto Chong (Andrew Young School of Policy Studies, Georgia State University and Department of Economics, Universidad del Pacifico, Peru) |
| Abstract: | A large literature treats political and economic institutions as jointly determined, implying that a shock that removes constraints on the executive should weaken both. I test this transmission hypothesis using data for 95 countries from 1950 to 2024. Using complementary causal quasi-experimental designs, I find that coups sharply deteriorate political, legal, and administrative institutions and increase corruption. Against these large responses, however, property rights change little. This is not evidence of inertness: the same property-rights index rises by 0.45 standard deviations following a democratic transition. Coups also move property rights within countries, increasing absolute deviations from pre-coup levels without a common direction. The evidence therefore points to asymmetric institutional adjustment: political constraints can collapse sharply while broad measured property-rights protection remains comparatively persistent. |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:ays:ispwps:paper2632 |
| By: | Ayoub Jhabli; Tarek Alskaif; Kwabena E. Bennin; Bedir Tekinerdogan; Joost M. E. Pennings |
| Abstract: | As renewable energy integration accelerates, intraday continuous (IDC) electricity markets have become essential for short-term balancing. However, the simultaneous trading of overlapping contracts with varying granularities creates complex, hidden liquidity dependencies that are critical to market stability but remain poorly understood. This paper proposes a multivariate State-Dependent Hawkes Process (SDHP) to model cross-product liquidity dynamics between Quarter-Hourly and Hourly IDC contracts. To determine how cross-product effects vary under different market conditions, we classify the trading sessions into two distinct regimes: 'Normal' and 'Stressed', based on a composite metric of the bid-ask spread, mid-price volatility and queue imbalance. The model is calibrated on the first month of each quarter of 2024 using level 3 limit order book (LOB) data from the Dutch EPEX SPOT IDC market. We find that order flow is overwhelmingly self-driven, with roughly 95\% of orders arriving in reaction to earlier orders in both regimes. Cross-excitation runs mainly from the Quarter-Hourly to the Hourly contract, but this leadership weakens under stress: the ratio of cumulative cross-excitation falls from 2.8 to 1.5, so the two contracts influence each other almost equally. Stress also makes the Quarter-Hourly to Hourly channel much faster, cutting its mean lag from 6.05 to 0.93 seconds. The strong seasonal variation found in calm periods largely disappears under stress, where all four months converge to the same structure. |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2610.23619 |
| By: | Christophe Cahn; Patrick Fève; Julien Matheron |
| Abstract: | This paper traces how dynamic stochastic general equilibrium (DSGE) models became a central tool for quantitative policy analysis in Central Banks. Their appeal grew out of the shortcomings of large-scale macroeconometric models, the Lucas and Sims critiques, and the gradual shift from real-business-cycle theory to the New Keynesian framework. The paper reviews the medium-scale DSGE model that became standard in policy institutions, as well as extensions dealing with unemployment, open-economy transmission, financial frictions, and fiscal policy. It also discusses the practical machinery (solution, estimation, forecasting, and counterfactual analysis) through which these models are brought to the data and used in policy work. The final part turns to heterogeneous-agent New Keynesian models (HANK), where incomplete markets and distributional heterogeneity reshape the transmission of monetary and fiscal policy. The central claim is that DSGE models remain valuable less as definitive descriptions of the economy than as a disciplined way to connect theory, data, and policy experiments, while identifying where richer mechanisms are needed. |
| Keywords: | DSGE Models; Central Banks; New Neoclassical Synthesis Models; HANK; Monetary Policy; Policy Analysis |
| JEL: | E32 E52 E58 C11 D14 D31 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:bfr:banfra:1066 |