chapter  9
9 Macroeconomics and the uses of general equilibrium
Pages 4

Here is the issue that I propose to discuss, briefly and informally. It is part substantive and part methodological. Academic macroeconomic theory of the past few decades has been dominated by the so-called ‘DSGE model’. DSGE stands for Dynamic Stochastic General Equilibrium. I think there is some ambiguity about the use of the word ‘Dynamic’ in this context, though I will pass that by. ‘Stochastic’ is clear enough. But what meaning and weight attach to ‘General Equilibrium’ in this version of macroeconomics? More broadly, what is a sensible relationship between general equilibrium theory in the sense given to it by Léon Walras and the construction and use of macroeconomic models?