Theoretical Models

Please find below relevant links to websites and software useful for the theoretical analysis of macroeconomic and financial dynamics  Therefore, the emphasis is on “picturing”, not necessarily “algebrising” the economy. To this effect I begin by showing the typical AD-AS model of the economy, that all economics graduates will have seen, but most will have forgotten. Next the emphasis is on solving DSGE models . This can be done for free through the use of Dynare in Octave. In the spirit of analytical democratisation, I am interested in the use of free, open source, tools. For those with the resources, the choice is available to solve DSGE models through the use of Dynare in Matlab.

AD-AS INTERACTIONS – Not exrtemely formal but interactive

As Krugman continues to say, every economist ought to have an AD-AS (IS-LM & LD-LS) model in the back of his head. I agree. To this end, I would like to direct you to White Nova‘s Think Economics website. There you can find a simple such model to play around with through a series of interactive graphs about:

On a more sophisticated and diverse note, you can also find this type of interactive modelling provided by Manfred Gärtner at Eurmacro. It provides a “road map” of macroeconomic topics as well as a tutorial of an extremely rich range of different interactive macro and political economy models. You need to have your Java Plugins up to date to use the applet. Finally, the Economics Web Institute also has some stand alone software which you might find useful.


General Software

  • Matlab (not for free) and Octave (for free) are two mathematic programmes that can be used as a platform for conducting any mathematical tasks. In that sense they can both be used for both theoretical and empirical analysis. However, on account of the large range of pre-packaged, user friendly, empirical software the emphasis is generally on the derivation of theoretical models. Please refer to this document for guidance on how to install and run Octave  with a user friendly Graphical User Interface.

Macroeconomic Modelling Packages for Matlab (and Octave)

  • YADA is a programme used by the ECB. It is similar to Dynare, except that I have found no reference to it working on Octave.  It can be downloaded here.

Stand Alone Theoretical Software

The European Commission economic research divisions have several resources of their own, on top of the models covered above. In parallel, professor Harald Uhilg, seems to be an economic open source entrepreneur, with a thought for user friendly tools. Uhlig’s Toolkit, asides from the  Macroeconomic Application Software, also provides a range of stand alone programmes which rather simply are only 1 model relevant, but are extremely easy to install and use. These are the models provided on a stand alonge platform that I could find. I’m sure many more exist:

From Professor Uhlig’s website (notes here):

For More Information …

… Professor Uhlig kindly offers these links as a map to guide you in these endeavours. I hope it helps!

Agent Based Models (ABM) – Comparison of Available Software




This is still a very early exercise, as I am no expert in finance. My understanding is that most of the quantitative efforts are conducting using the tools described above. However, whatever interesting tools I come across, I’ll post here:

1) Flow Network Simulator by Amadeo Alentorn – Project with the Financial Stability Group at the Bank of England to study how systemic risk is affected by the structure of the financial system, using simulations based on random graphs. (Download)


2)  Stock Price Probability with Stable Distributions Demonstration – This Demonstration calculates the probability that the random price of an exchange-traded fund will be higher or lower after one month than a particular future possibility. For further information, check:



P & P Freemap – This tool allows you to take a predetermined geographical location and configure it as you wish to display the specific regional differences of a preferred variable. (free trial version)


Codes by Authors

2 Responses to Theoretical Models

  1. Mauricio says:

    Brief comment:
    The Macroeconomic Model Database (version 2.0) code do not work in Octave with Dynare 4.4.2 nor 4.4.3. I believe the reason is that Octave “un-nests” nested functions differently than Matlab (see

    Thanks for the post!

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