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Title:: Research Progress and Prospects of Dynamic Stochastic General Equilibrium Model

Keywords:: Dynamic Stochastic General Equilibrium Model; New-Keynesian School; real business cycle; Bayesian Estimation

Abstract:: During the past thirty years, Dynamic Stochastic General Equilibrium(DSGE)model has become an economic workhorse model for mainstream economists in western countries to analyze and forecast macroeconomic performance, as well as an important reference tool for central banks of developed economies to make monetary policies. Based on a thorough study of existing literature on DSGE model, this paper concludes that DSGE model has gone through two stages of development. In the initial stage, the model focuses on improving economic theories; in the second, more importance is attached to updating mathematical methods to increase its accuracy in simulation and prediction. Also, the paper analyzes its theoretical and quantitative estimation issues, and the possibilities to resolve them. On this basis, the paper predicts future trends in the theoretical development of DSGE model, and its practical significance for Chinese economy.