Sensitivity Analysis and Model Evaluation in Simulated Dynamic General Equilibrium Economies

Fabio Canova

International Economic Review, 1995, vol. 36, issue 2, 477-501

Abstract: This paper describes a Monte Carlo procedure to evaluate dynamic nonlinear general equilibrium macro models. The procedure makes the choice of parameters and the evaluation of the model less subjective than standard calibration techniques, it provides more general restrictions than estimation by simulation approaches, and provides a way to conduct global sensitivity analysis for reasonable perturbations of the parameters. As an illustration, the technique is applied to three examples involving different models and statistics. Copyright 1995 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Date: 1995
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