Sensitivity Analysis and Model Evaluation in Simulated Dynamic General Equilibrium Economies *

This paper describes a Monte Carlo procedure to evaluate dynamic nonlinear general equilibrium macro models. The procedure makes the choice of parameters and the evaluation of the model less subjective than standard calibration techniques, it provides more general restrictions than estimation by simulation approaches and provides a way to conduct global sensitivity analysis for reasonable perturbations of the parameters. As an illustration the technique is applied to three examples involving different models and statistics.