What are the different types of macroeconomic models?

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area of ​​the economy is full of different types of macroeconomic models that are designed to achieve different goals. Part of the different classes are simple theoretical models (STM), empirical prediction models (EFM), dynamic stochastic general equilibrium (DSGE) models and models based on agents (AGE). The STM macroeconomic models usually consist of simple diagrams and/or equations to describe the economy as a whole. EFM models mainly use historical data and observations in an effort to predict future macroeconomic results. Models like DSGE include framework that seeks to predict the effects of changes in economic policy, while ACE models are to understand macroeconomic relationships by manifesting in detail at the microeconomic level.

Macroeconomic models such as STM consist of diagrams and/or equations and deal with several variables. There are agreed measures such as gross domestic product (GDP) D unemployment. STM models include model INvestice savings/liquidity preference (IS/LM) and Mundell-Fleming model. For example, the IS/LM has a main function that shows how interest rates are related to actual production of goods and services and money market sector.

EFM models are created to use statistical methods to try to predict possible scenarios. These models use historical data to estimate and understand the relationship between different macroeconomic variables. While the STM models are mainly engaged by aggregated measurements of the whole economy, the EFM models sometimes go in detail. For example, they can study relations between employment and investments in a specific industry.

models like DSGE include two main contradictory frames. One is known as the real model of the trading cycle and the other only Keynesian DSGE model. The real model of the business cycle consists of macroeconomic models that are based on the theory,which, among other things, claim that the fluctuations of the business cycle largely represent real shocks. In the economy, these are unexpected and unpredictable events that have negative or positive effects on the economies. The new Keynesian DSGE framework supports mainly models based on the theory that governments and central banks should interfere with the economy if necessary to stabilize the economic environment.

Finally, the ACE models are trying to decompose macroeconomic relations into microeconomic focused on industry. These models identify individual agents active in economics such as households and companies. Models basically study the interaction among these agents. In the basic sense, after studying a significant number of interactions between agents, it is possible to combine individual results with others on the creene aggregated macroeconomic relations that can then be studied. In addition, it is known that most macroeconomic models have their strengths and weaknesses, so economists are constantly improving them in an effort to strengthenlinen pages.