NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Measures of Fit for Calibrated Models

Mark W. Watson

NBER Technical Working Paper No. 102
Issued in May 1991
NBER Program(s):   PE

This paper develops a new procedure for assessing how well a given dynamic economic model describes a set of economic time series. To answer the question, the variables in the model are augmented with just enough error so that the model can exactly mimic the second moment properties of the actual data. The properties of this error provide a useful diagnostic for the economic model, since they show the dimensions in which model fits the data relatively well and the dimensions in which it fits the data relatively poorly.

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Document Object Identifier (DOI): 10.3386/t0102

Published: Journal of Political Economy, vol. 101, no. 6, (December 1993) p. 1011-1041

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