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

Reiner Franke

No 118, Computing in Economics and Finance 2004 from Society for Computational Economics

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

Keywords: Calibration; business cycle theory; disequilibrium adjustments; wage-price dynamics; aggregate demand (search for similar items in EconPapers)
JEL-codes: E12 E24 E25 (search for similar items in EconPapers)
Date: 2004-08-11
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Persistent link: https://EconPapers.repec.org/RePEc:sce:scecf4:118

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