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Theory, measurement, and calibration of macroeconomic models

  • Paul Gomme
  • Peter Rupert

Calibration has become a standard tool of macroeconomics. This paper extends and refines the calibration methodology along several important dimensions. First, accounting for home production is important both in measuring calibration targets and in organizing the data in a model-consistent fashion. For this reason, thinking about home production is important even if the model under consideration does not include home production. Second, investment-specific technological change is included because of its strong balanced growth parameter restrictions. Third, the measurement strategy is laid out as transparently as possible so that others can easily replicate the underlying calculations. The data and calculations used in this paper are available on the web.

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Paper provided by Federal Reserve Bank of Cleveland in its series Working Paper with number 0505.

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Date of creation: 2005
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Handle: RePEc:fip:fedcwp:0505
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  11. Paul Gomme & Finn Kydland & Peter Rupert, 2000. "Home production meets time-to-build," Working Paper 0007R, Federal Reserve Bank of Cleveland.
  12. James M. Poterba, 1999. "The Rate of Return to Corporate Capital and Factor Shares: New EstimatesUsing Revised National Income Accounts and Capital Stock Data," NBER Working Papers 6263, National Bureau of Economic Research, Inc.
  13. Barro, Robert J. & Sahasakul, Chaipat, 1986. "Average Marginal Tax Rates from Social Security and the Individual Income Tax," Scholarly Articles 3451298, Harvard University Department of Economics.
  14. Michael Gort & Jeremy Greenwood & Peter Rupert, 1999. "Measuring the Rate of Technological Progress in Structures," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(1), pages 207-230, January.
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  17. Michael R. Pakko, 2002. "Investment-specific technology growth: concepts and recent estimates," Review, Federal Reserve Bank of St. Louis, issue Nov, pages 37-48.
  18. Finn E. Kydland, 1993. "Business cycles and aggregate labor-market fluctuations," Working Paper 9312, Federal Reserve Bank of Cleveland.
  19. Seater, John J., 1985. "On the construction of marginal federal personal and social security tax rates in the U.S," Journal of Monetary Economics, Elsevier, vol. 15(1), pages 121-135, January.
  20. King, Robert G. & Plosser, Charles I. & Rebelo, Sergio T., 1988. "Production, growth and business cycles : I. The basic neoclassical model," Journal of Monetary Economics, Elsevier, vol. 21(2-3), pages 195-232.
  21. Finn E. Kydland & Edward C. Prescott, 1990. "Business cycles: real facts and a monetary myth," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr, pages 3-18.
  22. Gary Hansen, 2010. "Indivisible Labor and the Business Cycle," Levine's Working Paper Archive 233, David K. Levine.
  23. David Carey & Harry Tchilinguirian, 2000. "Average Effective Tax Rates on Capital, Labour and Consumption," OECD Economics Department Working Papers 258, OECD Publishing.
  24. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November.
  25. Richard Rogerson, 2010. "Indivisible Labor, Lotteries and Equilibrium," Levine's Working Paper Archive 250, David K. Levine.
  26. Ingram, Beth F. & Kocherlakota, Narayana R. & Savin, N. E., 1997. "Using theory for measurement: An analysis of the cyclical behavior of home production," Journal of Monetary Economics, Elsevier, vol. 40(3), pages 435-456, December.
  27. Ellen McGrattan & Richard Rogerson & Randall Wright, 1995. "An equilibrium model of the business cycle with household production and fiscal policy," Staff Report 191, Federal Reserve Bank of Minneapolis.
  28. Andreas Hornstein, 1999. "Growth accounting with technological revolutions," Economic Quarterly, Federal Reserve Bank of Richmond, issue Sum, pages 1-22.
  29. Jonas D.M. Fisher, 2001. "A real explanation for heterogeneous investment dynamics," Working Paper Series WP-01-14, Federal Reserve Bank of Chicago.
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