Small DSGE Model of the Russian Economy with Heterogeneous Adaptive Learning

Abstract

Within the framework of this study, a small DSGE model of the Russian economy with heterogeneous adaptive learning of economic agents is being developed. Comparing several modifications of the model through various assessments, building retrospective forecasts, calculating error measures, it is concluded that a model with heterogeneous adaptive learning of agents fits the data better than a model with rational expectations or homogeneous adaptive learning. Also, within the framework of the constructed model, the best rule of monetary policy is determined; according to it, the Central Bank should take into account not only inflation and output, but also respond to the exchange rate and the domestic oil price. The model constructed in this paper can potentially be used as a not very cumbersome tool for analyzing and forecasting the dynamics of the Russian economy, and the resulting conclusions about the optimal policy can be used to form the economic policy of the state.