While the theoretical development of DSGE models is not overly difficult
to understand, practical application remains somewhat complex. The
literature on this subject has some significant obscure points. This
book can be thought of, firstly, as a tool to overcome initial hurdles
with this type of modeling. Secondly, by showcasing concrete
applications, it aims to persuade incipient researchers to work with
this methodology. In principle, this is not a book on macroeconomics in
itself, but on tools used in the construction of this sort of models. It
strives to present this technique in a detailed manner, thereby
providing a step by step course intended to walk readers through this
otherwise daunting process. The book begins with a basic Real Business
Cycle model. Subsequently various frictions are gradually incorporated
into a standard DSGE model: imperfect competition; frictions in prices
and in wages; habit formation; non-Ricardian agents; adjustment cost in
investment; costs of not using the maximum installed capacity; and
finally, Government.