Dynamic equilibrium economies: a framework for comparing models and data

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