Dynamic Stochastic General Equilibrium (DSGE)

Dynamic Stochastic General Equilibrium (DSGE) models are tools economists use to understand how the economy evolves over time under uncertainty. They analyze how households, firms, and policymakers make decisions based on risks and changing conditions, such as inflation, interest rates, or shocks like a pandemic. By combining microeconomic principles with macroeconomic dynamics, DSGE models help forecast economic trends and evaluate policy impacts, providing a structured way to study complex economic interactions in a forward-looking, probabilistic framework.