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Stepwise calibration of a higher-order Keynes-Metzler-Goodwin model

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  • Reiner Franke

Abstract

The paper puts forward a deterministic macrodynamic model of the business cycle that allows for sluggish price and quantity adjustments in response to disequilibrium on product and labour markets. Based on regular oscillations of two exogenous variables, 14 reaction coefficients are determined in such a way that the cyclical patterns of the endogenous variables are broadly compatible with stylized facts. This calibration procedure is organized in a hierarchical structure, so that subsets of the parameters can be established step by step. In a second stage, the previous findings are checked with empirical fluctuations of the exogenous variables. Thirdly, the latter are endogenized and the corresponding additional parameters are chosen. The resulting dynamic system, which in its reduced form is of dimension six, generates persistent cyclical behaviour with similar time series properties of the variables as obtained before

Suggested Citation

  • Reiner Franke, 2004. "Stepwise calibration of a higher-order Keynes-Metzler-Goodwin model," Computing in Economics and Finance 2004 118, Society for Computational Economics.
    • Handle: RePEc:sce:scecf4:118
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Calibration; business cycle theory; disequilibrium adjustments; wage-price dynamics; aggregate demand;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution

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