Chapter 18Statistical Inference in Calibrated Models
Journal of Applied Econometrics 9, 1994, pp. 123–144
Department of Economics, Universität Pompeu Fabra, Balmes 132, 08008 Barcelona, Spain and Department of Economics, Università di Catania, 95100 Catania, Italy, and CEPR
Summary
This paper describes a Monte Carlo procedure to assess the performance of calibrated dynamic general equilibrium models. The procedure formalizes the choice of parameters and the evaluation of the model and provides an efficient way to conduct a sensitivity analysis for perturbations of the parameters within a reasonable range. As an illustration the methodology is applied to two problems: the equity premium puzzle and how much of the variance of actual ...
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