This is the critical thing - they&#x27;re not simulations. They are mathematical models based on a mix of the existing economic macro-economic formula. With upwards of 200 parameters that can be tweaked. There is no particular recipe btw - if you start digging into the configuration files for these &#x27;models&#x27;, you&#x27;ll find all sorts of things, with the occasional hilarious comment (my favourite -&#x27;this seems to work in Sweden&#x27;).<p>Note that at the same time macro economists are talking about the business cycle, and the purported fit of one of these models to it, they are cheerfully ignoring the applicable Nyquist limit for whatever period cycle they believe they&#x27;ve identified.<p>Again to use Iceland - because it&#x27;s a diddly little country and very easy to study. They stop the charts in 2005 because after that, there is a complete deviation from the model, which the model needless to say completely failed to predict. However, anyone who spent half an an hour looking at the Icelandic monetary statistics would have been able to identify clear warning signals from 2003 onwards, and some pretty clear analyses were being issued on that within the financial community by 2005.<p>Rumour has it the only use Wall Street has for DSGE models is to try and predict whatever crazy thing the central banks will do next.<p><a href="http:&#x2F;&#x2F;www.bloombergview.com&#x2F;articles&#x2F;2014-01-21&#x2F;wall-street-shorts-economists" rel="nofollow">http:&#x2F;&#x2F;www.bloombergview.com&#x2F;articles&#x2F;2014-01-21&#x2F;wall-street...</a>