Solving, Calibrating, and Simulating the Benchmark Real Business Cycle Model

University of Siena Working Paper No.293

33 Pages Posted: 6 Jan 2001

See all articles by Riccardo Bonci

Riccardo Bonci

European Central Bank (ECB); Bank of Italy

Date Written: July 2000

Abstract

In this paper the benchmark real business cycle model (Prescott, 1986) is solved using the fully recursive method by Binder and Pesaran (1997). The model economy is then calibrated on the US data (1954-1982), defined consistently with the variables of the standard model. To evaluate the model's ability of replicating observations also with respect to their cyclical component, the statistical properties of the simulated series are compared with the stylized facts of the US economy, obtained detrending the data with the Hodrick-Prescott filter. The results indicate that, although it is an over-simplified description of the economic activity, the model proves to be surprisingly capable of replicating the fundamental properties of actual business cycles.

Note: Downloadable paper is in Italian.

JEL Classification: E1, E3, C1

Suggested Citation

Bonci, Riccardo, Solving, Calibrating, and Simulating the Benchmark Real Business Cycle Model (July 2000). University of Siena Working Paper No.293, Available at SSRN: https://ssrn.com/abstract=251728 or http://dx.doi.org/10.2139/ssrn.251728

Riccardo Bonci (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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