Empirical Calibration ofSimulation Models

In economics simulation models are used quite a lot to carry out mathematical experiments.However, the specification of the parameter set with which to run these simulations is, ingeneral, quite an adventure into the unknown. Criticism is easily found with the procedure, asit is difficult to justify why to choose one specification of parameters and not another -especially if the results found in the simulation models are striking. Then, the audience cannothelp but think that there has been quite some arbitrary trial and error going on to achieve this.To avoid this impression, we suggest to empirically calibrating simulation models in a waythat makes their results more acceptable. However, compared with models of mainstreameconomics that usually can be solved analytically, simulation models have only recently beenopened to empirical data. It is fair to say that also analytically solvable models have quitesome problems concerning the integration of empirical data (cf. Kydland/Prescott, 1996).These problems also emerge when working with simulation models...