T his study investigated the effect of international labor migration on Iran’s economy using a neo-classical growth model with the assumption of labor heterogeneity within the framework of dynamic stochastic general equilibrium model. After solving the model, the obtained equations were linearized and different values were assigned to the parameters according to Iran’s economy inform...

This paper develops a novel approach for estimating latent state variables of Dynamic Stochastic General Equilibrium (DSGE) models that are solved using a second-order accurate approximation. I apply the Kalman filter to a state-space representation of the second-order solution based on the ‘pruning’ scheme of Kim, Kim, Schaumburg and Sims (2008). By contrast to particle filters, no stochastic ...

Real Expectations: Replacing Rational Expectations with Survey Expectations in Dynamic Macro Models Jeff Fuhrer Abstract: This paper examines the implications of changing the expectations assumption that is embedded in nearly all current macroeconomic models. The paper substitutes measured or “real” expectations for rational expectations in an array of standard macroeconomic relationships, as w...

Since 2010, and in line with austerity measures, public employment public-sector compensations to employees have been significantly reduced most Euro Area member states particularly Spain Greece. At the same time, unemployment these two economies was greatly increasing. In a dynamic stochastic general equilibrium (DSGE) model, we demonstrate that cuts wages are more damaging terms of output los...

Does economic theory help in forecasting key macroeconomic variables? This article aims to provide some insight into the question by drawing lessons from the literature. The definition of "economic theory" includes a broad range of examples, such as accounting identities, disaggregation and spatial restrictions when forecasting aggregate variables, cointegration and forecasting with Dynamic Sto...