Document Type

Thesis - Open Access

Award Date

2025

Degree Name

Master of Science (MS)

Department / School

Economics

First Advisor

Zhiguang Wang

Abstract

This thesis develops a series of simplified Dynamic Stochastic General Equilibrium (DSGE) model variants to analyze macroeconomic dynamics at the U.S. state level. Using South Dakota as a case study, I extend the Smets and Wouters (2007) mediumscale framework by implementing state-specific output, labor, consumption, investment, and wages into a dual-economy structure, where the state is modeled as a closed economy influenced by national-level shocks. The models are estimated using Bayesian techniques on quarterly data from 2007 - 2020. Model performance is evaluated through impulse response functions and variance decompositions. A key result is that South Dakota exhibits firm habit formation in consumption behavior, leading to more gradual and dampened responses to shocks than the national economy. This shock-resistance has implications for state-level policy design and highlights the need for tailored responses in the presence of national economic disturbances.

Library of Congress Subject Headings

Equilibrium (Economics) -- Econometric models.
Macroeconomics -- Econometric models.
Monetary policy -- United States.
Monetary policy -- South Dakota.

Publisher

South Dakota State University

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Rights Statement

In Copyright