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Calibration in Macroeconomics

  • Allan W. Gregory
  • Gregor W. Smith

This chapter reviews calibration techniques in macroeconomics. The discussion designs with an outline of the use of calibration in applied work. Next, a simple asset-pricing model is the setting for a demonstration of calibration and for comparison with conventional estimation and testing. Experiments with calibrated models may be formalized as Monte Carlo testing. With the asset-pricing model, we use simulation methods to calculate the exact size of the variance-bounds-type test proposed by Hansen and Jagannathan (1991). Finally, we suggest that calibration is best viewed as an informal guide to model reformulation

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File Function: First version 1991
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Paper provided by Queen's University, Department of Economics in its series Working Papers with number 826.

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Length: 36 pages
Date of creation: Jun 1991
Date of revision:
Handle: RePEc:qed:wpaper:826
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