Dynamic Stochastic General Equilibrium Models: Real Business Cycles Models: Closed and Open Economy

This textbook guides the student step-by-step in developing and solving a DSGE (Dynamic Stochastic General Equilibrium) model-not only from the technical and conceptual aspects but also through the simulation process of each model. Characterized by a learning-by-doing approach, the book is set apart from the extant textbooks in three ways. First, it performs all the algebra associated with each model, such as the calculation of steady-state and the log-linearization of the model. Second, each model developed has been generated in Dynare, and every chapter is accompanied by a set of codes (mod-files and m-files) that the reader can use to replicate the model developed in every chapter. Finally, the models considered are toy models in the closed and open economy, which allows the student to learn the basic lessons and understand the fundamental relationships of the variables. All of this prepares the student to deal with more complex models.

This book is intended for advanced undergraduate or beginning graduate courses in economics, finance, or applied mathematics, as well as practitioners in central banks that use these models daily in the preparation of forecasts or simulations of aggregate variables.

Hamilton Galindo Gil is an assistant professor in the Department of Finance and Economics at Cleveland State University (US), where he teaches courses in financial management and policies and asset pricing at the graduate level. He received a Ph.D. in Finance from Arizona State University, an M.A. in Economics from the University of the Pacific (Peru), and a B.Sc. in economics engineering from the National University of Engineering (Peru). Dr. Galindo’s research interests include macro-finance, structural estimation in corporate finance, and heterogeneous agents in asset pricing.

Alexis Montecinos’s research focuses on financial economics, business analytics, and industrial organization. He has been a visiting professor at MIT Sloan, a macroeconomics advisor for the government of Chile, the IDB, and He is currently a Finance Professor at Suffolk University and the Managing Director of Pharu Analytics, a leading analytics company in Latam. He is very connected to the industry and constantly develops new projects for companies and governments worldwide. He has taught economics and analytics in more than 20 universities worldwide. Among the most important prizes he has received, he was recognized as one of the 25 most successful professionals under 35 in Chile.

Marco Ortiz is an associate professor in the Department of Economics at the University of the Pacific (Peru). He holds a Ph.D. in Economics and a Master’s in research in Economics from the London School of Economics and Political Science (UK) and a B.A. in Economics from the University of the Pacific. He has teaching experience at the Graduate School of the University of the Pacific in the Master’s degree program in Economics. He served as Deputy Manager of Monetary Policy Design and Head of the Macroeconomic Modelling Department at the Central Reserve Bank of Peru. He was also a Consultant and Professional Associate at the World Bank.