SENSITIVITY ANALYSIS AND MODEL EVALUATION IN SIMULATED DYNAMIC GENERAL EQUILIBRIUM ECONOMIES

This paper describes a Monte Carlo procedure to evaluate dynamic nonli near general equilibrium macro models. The procedure makes the choice of parameters and the evaluation of the model less subjective than sta ndard calibration techniques, it provides more general restrictions th an estimation by simulation approaches and provides a way to conduct g lobal sensitivity analysis for reasonable perturbations of the paramet ers. As an illustration the technique is applied to three examples inv olving different models and statistics.