Economics

This project develops the theory for identification of dynamic stochastic general equilibrium (DSGE) models and studies its implications for estimation and inference. DSGE models have now reached the level of sophistication to permit analysis of important macroeconomic issues. Whereas the parameters in these models used to be calibrated, numerical advances in the last two decades have made it possible to estimate models with as many as a hundred parameters.

Fiscal capacity is one of the most important constraints on economic growth (Besley and Persson, 2013). In developing countries, the state’s ability to tax its citizens is typically limited by (a) the cost of acquiring accurate information on taxable activities, and (b) the tax agency’s capacity to enforce the tax rules. The literature has highlighted the central role of information flows for fiscal capacity (Kleven, Kreiner, and Saez, 2009), and of civil servants’ characteristics on government capacity/performance (e.g. Dal Bo, Finan, and Rossi, 2013).