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Dynamic Equilibrium Economies: A Framework for Comparing Models and Data

Author

Listed:
  • Francis X. Diebold
  • Lee E. Ohanian
  • Jeremy Berkowitz
Abstract
We propose a constructive, multivariate framework for assessing agreement between (generally misspecified) dynamic equilibrium models and data, which enables a complete second-order comparison of the dynamic properties of models and data. We use bootstrap algorithms to evaluate the significance of deviations between models and data, and we use goodness-of-fit criteria to produce estimators that optimize economically-relevant loss functions. We provide a detailed illustrative application to modelling the U.S. cattle cycle.

Suggested Citation

  • Francis X. Diebold & Lee E. Ohanian & Jeremy Berkowitz, 1998. "Dynamic Equilibrium Economies: A Framework for Comparing Models and Data," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 65(3), pages 433-451.
    • Handle: RePEc:oup:restud:v:65:y:1998:i:3:p:433-451.
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    File URL: http://hdl.handle.net/10.1111/1467-937X.00052
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    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models

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