This paper shows how large-dimensional dynamic factor models are suitable for structural analysis. We establish sufficient conditions for identification of the structural shocks and the associated impulse-response functions. In particular, we argue that, if the data follow an approximate factor...

Nominal rigidities due to menu costs have become a standard element in closed economy macroeconomic modelling. The 'New Open Economy Macroeconomics' literature has investigated the implications of nominal rigidities in an open economy context and found that the currency in which prices are set...

Dynamic rational inattention problems used to be difficult to solve. This paper provides simple, analytical results for dynamic rational inattention problems. We start from the benchmark rational inattention problem. An agent tracks a variable of interest that follows a Gaussian process. The...

We review the recent literature that studies new, detailed micro data on prices. We discuss implications of the new micro data for macro models. We argue that the new micro data are helpful for macro models, but not decisive. There is no simple mapping from the frequency of price changes in...

The post-crisis environment has posed important challenges to standard forecasting models. In this paper, we exploit several combinations of a large-scale DSGE structural model with standard reduced-form methods such as (B)VAR (i.e. DSGE-VAR and Augmented-(B)VARDSGE methods) and assess their use...

Macroeconomic imbalances increase the vulnerability of an economy to adverse shocks, which in turn can lead to crises with severe economic and social costs. We propose an early warning model that predicts such crises. We identify a set of macroeconomic indicators capturing domestic and external...

In a highly interlinked global economy a key question for policy makers is how foreign shocks and policies transmit to the domestic economy. We develop a semi-structural multi-country model with rich real and financial channels of international shock propagation for the euro area, the US, Japan,...

This survey discusses behavioral and experimental macroeconomics emphasizing a complex systems perspective. The economy consists of boundedly rational heterogeneous agents who do not fully understand their complex environment and use simple decision heuristics. Central to our survey is the...

This paper presents DSGE Nash, a toolkit to solve for pure strategy Nash equilibria of global games in macro models. Although primarily designed to solve for Nash equilibria in DSGE models, the toolkit encompasses a broad range of options including solutions up to the third order, multiple...

In this paper we discuss the role of the cross-sectional heterogeneity of beliefs in the context of understanding and assessing macroeconomic vulnerability. Emphasis lies on the potential of changing levels of disagreement in expectations to influence the propensity of the economy to switch...