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Working Papers, No. 2023-36, September 2023 Crossref
The Chicago Fed DSGE Model: Version 2

The Chicago Fed dynamic stochastic general equilibrium (DSGE) model is used for policy analysis and forecasting at the Federal Reserve Bank of Chicago. This guide describes its specification, estimation, dynamic characteristics, and how it is used to forecast the U.S. economy. In many respects the model resembles other medium-scale New Keynesian frameworks, but there are several features which distinguish it: the monetary policy rule includes anticipated future deviations, productivity is driven by both neutral and investment specific technical change, multiple price and wage indices identify price and wage inflation, the data are measured in a model consistent way, and market-expected interest rates are used to measure the expected path of the federal funds rate that is taken into account by the model’s agents when they make their decisions. The model also incorporates a new method introduced by Ferroni, Fisher, and Melosi (2023) to address the unusual Covid pandemic macroeconomic dynamics.

Working papers are not edited, and all opinions and errors are the responsibility of the author(s). The views expressed do not necessarily reflect the views of the Federal Reserve Bank of Chicago or the Federal Reserve System.

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