Handbook of Research Methods and Applications in Empirical Macroeconomics
Show Less

Handbook of Research Methods and Applications in Empirical Macroeconomics

Edited by Nigar Hashimzade and Michael A. Thornton

This comprehensive Handbook presents the current state of art in the theory and methodology of macroeconomic data analysis. It is intended as a reference for graduate students and researchers interested in exploring new methodologies, but can also be employed as a graduate text. The Handbook concentrates on the most important issues, models and techniques for research in macroeconomics, and highlights the core methodologies and their empirical application in an accessible manner. Each chapter is largely self-contained, whilst the comprehensive introduction provides an overview of the key statistical concepts and methods. All of the chapters include the essential references for each topic and provide a sound guide for further reading.
Buy Book in Print
Show Summary Details
You do not have access to this content

Chapter 24: Calibration and simulation of DSGE models

Paul Gomme and Damba Lkhagvasuren


Many interesting macroeconomic models are either sufficiently complex that they must be solved computationally, or the questions being asked are inherently quantitative and so they should be solved computationally. The first group includes almost any empirically relevant version of the neoclassical growth model. The second group includes such basic questions as business cycle fluctuations: How well does the neoclassical growth model do in producing variation in macroaggregates (like output, consumption, investment and hours worked) that ‘look like’ those seen in the data. These are quantitative questions for which qualitative answers are insufficient. Calibration is an effective tool for imposing discipline on the choice of parameter values that arise in such models, taking what would otherwise be a numerical example into the realm of an empirically relevant exercise with parameters tightly pinned down by either long- run growth facts, or microeconomic observations. As such, calibration is a useful part of the macroeconomist’s toolkit. This chapter is concerned with measurement as it pertains to calibration. Kydland and Prescott (1982) provided the foundations for the calibration procedure; key subsequent developments have been made by Prescott (1986), Cooley and Prescott (1995) and Gomme and Rupert (2007). This chapter builds chiefly on Gomme and Rupert. Like this earlier paper, our goal is to provide a sufficiently careful and detailed description of our procedures for others to be easily able to replicate our work.

You are not authenticated to view the full text of this chapter or article.

Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.

Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.

Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.

Further information

or login to access all content.