SADCO is mentioned in a report of the European Commission on the outcomes of EU-funded research relating to the financial crisis

Excerpt from the European Commission report "Financial crisis: causes, policy responses, future challenges. Outcomes of EU-funded research" (p.68) :

As the new empirical studies using MRVAR (Multi-Regime Value at Risk) on fiscal and monetary policy show intertemporal equilibrium models have severe deficiencies in predicting what happens in out-of-steady-states and what effects they have on policies. (…) Larger shocks, frequently triggered by financial or banking shocks, cannot be dealt with and the effects of larger shocks, where the economy is moving to a different regime, for example to a low level of output and high level of financial stress, are outside of the range of these models. In real economies larger shocks may generate macroeconomic amplifiers and the economy may not return by itself to the normal steady-state, thus fiscal and monetary policies are needed. Modeling this type of behavior of the economies is not feasible using DSGE models, since it requires a new methodology that allows for instabilities, macroeconomic amplification mechanisms regime changes. Such a new macroeconomic methodology is provided by recently developed work going under the name nonlinear model predictive control (NMPC) (Grüne et al. 2013). This new methodology is actually the outcome of EU Framework Programme FP7-PEOPLE-2010-ITN, SADCO. 

Document Actions