This article surveys Dynamic Stochastic General Equilibrium models, from the Real Business Cycle to the New Keynesian variant. We spell out both the analytics and the empirics of the models, as well as their historical origins.

We study the U.S. fertility transition by family type and document a novel fact: intergenerational coresidence has been systematically associated with lower fertility than nuclear families. This gap has been narrowing over time. This fact cannot be easily explained by existing theories. We propose a new theory in which both fertility and family structure are endogenous. In our theory, a positive fertility differential in favour of the nuclear family emerges when the amount of resources allocated to the young generation under coresidence is lower than the amount they would enjoy in a nuclear family. The allocation of resources depends on the income of the young relative to that of their coresiding parents and on preferences for intergenerational coresidence. We derive the model analytically, and find empirical support for its main mechanism. Simulations from a calibrated dynamic general equilibrium version of the model confirm that the model has the right qualitative behaviour, and is quantitatively meaningful.

We introduce adaptive learning – a parsimonious, convenient way to model uncertainty – in a dynamic general equilibrium model of the U.S. Great Depression. We show that even the smallest departure from rational expectations increases significantly the data mimicking ability of the model, in particular for what concerns the lack of recovery in detrended GDP after 1933. We conclude that in the case of big, traumatic events like the Great Depression, uncertainty is particularly unfavourable to the recovery phase.

In this paper, we introduce a new understanding of the mainstream notion in economics. Its distinct character is based on a set of methodological standards deemed compulsory in the theoretical or empirical practice of the discipline. We contend that a theoretical mainstream arose around the 1980s, when the prevailing methodological standards in microeconomics and game theory – mathematical language, equilibrium discipline, and ‘explicit micro-foundations’ – came to be adopted in theoretical papers across a wide range of fields and specializations. We further argue that the 1990 period witnessed the surge of a distinct empirical mainstream and the emergence of a joint mainstream, the result of the rise of experimental economics and a renewal of applied economics centered on the notion of causal inference. An examination of the contents of the articles published in top journals in selected years from 1970 to 2018 confirms our contention.

This paper studies the Great Depression in Belgium within the open-economy dynamic general equilibrium model. Results from the simulations show that productivity shocks, trade restrictions and nominal exchange rate shocks can account for 64% of the observed drop in output between 1929 and 1934. That value becomes 74% if we include a calibrated shock to the demand from the rest of the world. However, the lacklustre recovery after the 1935 devaluation of the Belgian franc remains largely unexplained, suggesting that additional shocks are needed to fully account for the data.