Stepwise Calibration of a Higher - Order Keynes - Metzler - Goodwin Model

The paper puts forward a deterministic macrodynamic model of the business cycle that allows for sluggish price and quantity adjustments in response to disequilibrium on product and labour markets. Based on regular oscillations of two exogenous variables, 14 reaction coe cients are calibrated such that the cyclical patterns of the endogenous variables are broadly compatible with stylized facts. The calibration procedure is organized in a hierarchical structure, so that subsets of the parameters can be determined step by step. Subsequently, the exogenous variables are endogenized and the additional parameters are chosen. The resulting dynamic system, which in its reduced form is of dimension six, generates persistent cyclical behaviour with similar time series properties of the variables as found before. JEL classi cation: E12.