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Dynamic equilibrium economies: a framework for comparing models and data

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Author Info
Francis X. Diebold
Lee E. Ohanian
Jeremy Berkowitz

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Abstract

We propose a constructive, multivariate framework for assessing agreement between (generally misspecified) dynamic equilibrium models and data, a framework which enables a complete second-order comparison of the dynamic properties of models and data. We use bootstrap algorithms to evaluate the significance of deviations between models and data, and we use goodness-of-fit criteria to produce estimators that optimize economically relevant loss functions. We provide a detailed illustrative application to modeling the U.S. cattle cycle.

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Paper provided by Federal Reserve Bank of Minneapolis in its series Staff Report with number 243.

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Date of creation: 1998
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Handle: RePEc:fip:fedmsr:243

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  2. Backus, David K & Kehoe, Patrick J & Kydland, Finn E, 1994. "Dynamics of the Trade Balance and the Terms of Trade: The J-Curve?," American Economic Review, American Economic Association, vol. 84(1), pages 84-103, March. [Downloadable!] (restricted)
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  3. Diebold, Francis X, 1998. "The Past, Present, and Future of Macroeconomic Forecasting," Journal of Economic Perspectives, American Economic Association, vol. 12(2), pages 175-92, Spring. [Downloadable!] (restricted)
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  4. Jones, Larry E & Manuelli, Rodolfo E, 1990. "A Convex Model of Equilibrium Growth: Theory and Policy Implications," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 1008-38, October. [Downloadable!] (restricted)
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  6. Engle, Robert F, 1974. "Band Spectrum Regression," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 15(1), pages 1-11, February. [Downloadable!] (restricted)
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  7. Allan Gregory & Gregor Smith, 1990. "Calibration as estimation," Econometric Reviews, Taylor and Francis Journals, vol. 9(1), pages 57-89. [Downloadable!] (restricted)
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  8. Watson, Mark W, 1993. "Measures of Fit for Calibrated Models," Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 1011-41, December. [Downloadable!] (restricted)
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  11. Pagan, Adrian, 1994. "Calibration and Econometric Research: An Overview: Introduction," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 9(S), pages S1-10, Suppl. De. [Downloadable!] (restricted)
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  13. Christopher A. Sims, 1989. "Models and their uses," Discussion Paper / Institute for Empirical Macroeconomics 11, Federal Reserve Bank of Minneapolis. [Downloadable!]
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  17. Lars Peter Hansen & Thomas J. Sargent, 1990. "Recursive Linear Models of Dynamic Economies," NBER Working Papers 3479, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  19. Franke,J. Haerdle,W., 1987. "On bootstrapping Kernel spectral estimates," Discussion Paper Serie A 121, University of Bonn, Germany.
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  20. Greenwood, Jeremy & Hercowitz, Zvi & Krusell, Per, 1997. "Long-Run Implications of Investment-Specific Technological Change," American Economic Review, American Economic Association, vol. 87(3), pages 342-62, June. [Downloadable!] (restricted)
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  21. Timothy Cogley & James M. Nason, 1993. "Output dynamics in real business cycle models," Working Papers in Applied Economic Theory 93-10, Federal Reserve Bank of San Francisco.
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  22. Christiano, Lawrence J & Eichenbaum, Martin, 1995. "Liquidity Effects, Monetary Policy, and the Business Cycle," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(4), pages 1113-36, November. [Downloadable!] (restricted)
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  23. Ericson, Richard & Pakes, Ariel, 1995. "Markov-Perfect Industry Dynamics: A Framework for Empirical Work," Review of Economic Studies, Blackwell Publishing, vol. 62(1), pages 53-82, January. [Downloadable!] (restricted)
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  33. Robert E. Lucas, Jr., 1989. "On the Mechanics of Economic Development," NBER Reprints 1176, National Bureau of Economic Research, Inc.
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  34. Lucas, Robert E, Jr, 1990. "Supply-Side Economics: An Analytical Review," Oxford Economic Papers, Oxford University Press, vol. 42(2), pages 293-316, April. [Downloadable!] (restricted)
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