The Empirical Foundations of Calibration

Lars Hansen and James Heckman

Journal of Economic Perspectives, 1996, vol. 10, issue 1, 87-104

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.

JEL-codes: C50 (search for similar items in EconPapers)
Date: 1996
Note: DOI: 10.1257/jep.10.1.87
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Citations: View citations in EconPapers (196)

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