Business cycle Essay Example | Topics and Well Written Essays - 500 words

Business cycle - Essay Example For instance, the choice of the parameter values depends on the macroeconomic evidences available for comparison purposes (Romer 217-220). It is also apparent that the calibration model can result in the statistical rejection of adoption of a concept in business operations. This is because most models are always difficult to interpret and a model that fits the data properly, within different dimensions, may be statistically rejected if one aspect is omitted (Summers 129-148). A model may still be ignored if the data is consistent with a wide variety of options. The models are calibrated to ensure that they undergo testing via the formal econometric methods. This is normally done through the identification of available evidence against the variances of other data in the series. For instance, the comparison of labor against capital and output can adopt the calibrated model (Romer 217-220). This means that government intervention and technological components do not apply in the final determination of outputs. The calibration is different from other models like the Solow theory that assumes the prevalence of technology in productivity. However, an alternative model for calibration is the proper assessment of fully specified models in which the researchers determine models using macroeconomic evidences (Romer 217-220). This focuses on the main building aspects or through the evaluation of the model’s consistency with other statistics. According to Summers (p. 129-148), calibration model enables economists to apply different concepts in the interpretation of their business performance. The historical data comparison helps in speculation purposes in which a firm can change its methods to suit the trend. This is done through the relation between variables and independent factors present in the industry (Summers 129-148). As a result, the real-business cycle model relies on