Dynamic Stochastic General Equilibrium (DSGE) models

Dynamic Stochastic General Equilibrium (DSGE) models are economic tools used to understand how economies evolve over time under uncertainty. They incorporate various factors, such as consumer behavior, market dynamics, and government policies, to predict economic outcomes. "Dynamic" refers to changes over time, "stochastic" indicates the role of random events, and "general equilibrium" means these models consider how different sectors of the economy interact. Economists use DSGE models to analyze the effects of policy changes, economic shocks, and to forecast future economic conditions, providing a structured way to interpret complex economic relationships.