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The Empirical Foundations of Calibration

Author Info

Listed author(s):
  • Lars Peter Hansen
  • James J. Heckman

Abstract

Interest in simulating recently developed dynamic stochastic general equilibrium models of the economy stimulated a demand for parameters. This has given rise to calibration as advocated by Finn E. Kydland and Edward C. Prescott (1982). This paper explores the implicit assumptions underlying their calibration method. The authors question that there is a ready supply of micro estimates available to calibrate macroeconomic models. Measures of parameter uncertainty and specification sensitivity should be routinely reported. They propose a more symbiotic role for calibration as providing signals to microeconomists about important gaps in knowledge, which when filled will solidify the empirical underpinning, improving the credibility of the quantitative output.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.10.1.87
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Article provided by American Economic Association in its journal Journal of Economic Perspectives.

Volume (Year): 10 (1996)
Issue (Month): 1 (Winter)
Pages: 87-104

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Handle: RePEc:aea:jecper:v:10:y:1996:i:1:p:87-104
Note: DOI: 10.1257/jep.10.1.87
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Find related papers by JEL classification:

  • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General

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  1. > Schools of Economic Thought, Epistemology of Economics > Economic Methodology > Dynamic Stochastic General Equilibrium
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  1. Quantitative Macroeconomics and Real Business Cycles (QM&RBC)

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