Munich Personal RePEc Archive

How accounting accuracy affects DSGE models

Kim, Minseong (2016): How accounting accuracy affects DSGE models.

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Abstract

This paper explores how accounting consistency affects DSGE models. As many DSGE models descended from real business cycle models, I explore a simple labor-only RBC model with an exogenous external sector introduced. The conclusion reached in this paper is that once an external sector is introduced, DSGE models may suffer from accounting inconsistency, unless disequilibrium or some non-orthodox theory of price level, real monetary supply or bonds is accepted.

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