Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/67789
Authors: 
Cozzi, Marco
Year of Publication: 
2011
Series/Report no.: 
Queen's Economics Department Working Paper 1277
Abstract: 
This paper discusses a series of Monte Carlo experiments designed to evaluate the empirical properties of heterogeneous-agent macroeconomic models in the presence of sampling variability. The calibration procedure leads to the welfare analysis being conducted with the wrong parameters. The ability of the calibrated model to correctly predict the welfare changes induced by a set of policy experiments is assessed. The results show that, for the economy and the policy reforms under analysis, the model always predict the right sign of the welfare effects. Quantitatively, the maximum errors made in evaluating a policy change are very small for some reforms (in the order of 0.05 percentage points), but bigger for others (in the order of 0.5 pp). Finally, having access to better data, in terms of larger samples, does lead to sizable increases in the precision of the welfare effects estimates.
Subjects: 
Monte Carlo
Heterogeneous Agents
Incomplete Markets,
Ex-ante Policy Evaluation
Welfare
JEL: 
C15
C54
C68
D52
Document Type: 
Working Paper

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