Central Banks Use Flawed Macroeconomic Models

"The headline summarizes the observations of economist Paul De Grauwe, who takes central banks to task for their reliance on so-called Dynamic Stochastic General Equilibrium models (DGSE). De Grauwe objects to some of the fundamental assumptions embedded in them (consumers are rational and all have the same preferences, any disruptions are the result of external shocks, as opposed, say, to internal imbalances, such as misallocation or mispricing of capital)."