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Recent Developments in DSGE Modelling: Beyond FIRE

Paul Levine, Joseph Pearlman, Bo Yang Orcid Logo, Son Pham

South Asian Journal of Macroeconomics and Public Finance, Volume: 14, Issue: 1, Pages: 11 - 43

Swansea University Author: Bo Yang Orcid Logo

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DOI (Published version): 10.1177/22779787251343477

Abstract

This survey focuses on the standard assumption in DSGE models: rational expectations (RE) with perfect information (PI) aka full information (FI)—hence FIRE. RE means model consistent expectations—agents be they households, firms, banks or policymakers know your model. PI (or FI) means agents observ...

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Published in: South Asian Journal of Macroeconomics and Public Finance
ISSN: 2277-9787 2321-0273
Published: SAGE Publications 2025
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URI: https://cronfa.swan.ac.uk/Record/cronfa69864
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spelling 2025-09-04T13:28:15.7147392 v2 69864 2025-07-02 Recent Developments in DSGE Modelling: Beyond FIRE d8e17e56a3b9484ba22c3d43807c83bd 0000-0001-5834-6002 Bo Yang Bo Yang true false 2025-07-02 SOSS This survey focuses on the standard assumption in DSGE models: rational expectations (RE) with perfect information (PI) aka full information (FI)—hence FIRE. RE means model consistent expectations—agents be they households, firms, banks or policymakers know your model. PI (or FI) means agents observe or can infer the current and past state variables in your model. RE + PI (or FIRE) is a strong assumption. The purpose of this survey is to examine the literature that relaxes RE or PI or both. This is relevant for DSGE models in general, but particularly so for the efficacy of monetary policy in a New Keynesian environment when the expectation by agents of future policy is of crucial importance. Journal Article South Asian Journal of Macroeconomics and Public Finance 14 1 11 43 SAGE Publications 2277-9787 2321-0273 Behavioural macroeconomics; imperfect information; heterogeneous expectations 30 6 2025 2025-06-30 10.1177/22779787251343477 COLLEGE NANME Social Sciences School COLLEGE CODE SOSS Swansea University Another institution paid the OA fee The authors received no financial support for the research, authorship and/or publication of this article. 2025-09-04T13:28:15.7147392 2025-07-02T11:55:47.8655996 Faculty of Humanities and Social Sciences School of Social Sciences - Economics Paul Levine 1 Joseph Pearlman 2 Bo Yang 0000-0001-5834-6002 3 Son Pham 4 69864__35031__cc3cfd1ef0c04129871fe95d818349e6.pdf 69864.VoR.pdf 2025-09-04T13:25:37.5748991 Output 1417490 application/pdf Version of Record true © 2025 The Author(s). This article is distributed under the terms of the Creative Commons Attribution 4.0 License. true eng https://creativecommons.org/licenses/by/4.0/
title Recent Developments in DSGE Modelling: Beyond FIRE
spellingShingle Recent Developments in DSGE Modelling: Beyond FIRE
Bo Yang
title_short Recent Developments in DSGE Modelling: Beyond FIRE
title_full Recent Developments in DSGE Modelling: Beyond FIRE
title_fullStr Recent Developments in DSGE Modelling: Beyond FIRE
title_full_unstemmed Recent Developments in DSGE Modelling: Beyond FIRE
title_sort Recent Developments in DSGE Modelling: Beyond FIRE
author_id_str_mv d8e17e56a3b9484ba22c3d43807c83bd
author_id_fullname_str_mv d8e17e56a3b9484ba22c3d43807c83bd_***_Bo Yang
author Bo Yang
author2 Paul Levine
Joseph Pearlman
Bo Yang
Son Pham
format Journal article
container_title South Asian Journal of Macroeconomics and Public Finance
container_volume 14
container_issue 1
container_start_page 11
publishDate 2025
institution Swansea University
issn 2277-9787
2321-0273
doi_str_mv 10.1177/22779787251343477
publisher SAGE Publications
college_str Faculty of Humanities and Social Sciences
hierarchytype
hierarchy_top_id facultyofhumanitiesandsocialsciences
hierarchy_top_title Faculty of Humanities and Social Sciences
hierarchy_parent_id facultyofhumanitiesandsocialsciences
hierarchy_parent_title Faculty of Humanities and Social Sciences
department_str School of Social Sciences - Economics{{{_:::_}}}Faculty of Humanities and Social Sciences{{{_:::_}}}School of Social Sciences - Economics
document_store_str 1
active_str 0
description This survey focuses on the standard assumption in DSGE models: rational expectations (RE) with perfect information (PI) aka full information (FI)—hence FIRE. RE means model consistent expectations—agents be they households, firms, banks or policymakers know your model. PI (or FI) means agents observe or can infer the current and past state variables in your model. RE + PI (or FIRE) is a strong assumption. The purpose of this survey is to examine the literature that relaxes RE or PI or both. This is relevant for DSGE models in general, but particularly so for the efficacy of monetary policy in a New Keynesian environment when the expectation by agents of future policy is of crucial importance.
published_date 2025-06-30T05:29:18Z
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score 11.089386

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