The specification of parameters is a crucial task in the development of economic
models. The objective of this paper is to improve the standard parameter specification
of computable general equilibrium (CGE) models. On that account, we
illustrate how Optimal Fingerprint Detection Methods (OFDM) can be used to
identify appropriate values for various parameters. This method originates from
climate science and combines a simple model validation exercise with a structured
sensitivity analysis. The new approach has three main benefits: 1) It uses a structured
optimisation procedure and does not revert to ad-hoc model improvements.
2) It allows to account for uncertainty in parameter estimates by using information
on the distribution of parameter estimates from the literature. 3) It can be applied
for the specification of a range of parameters required in CGE models, for example
for the definition of elasticities or productivity growth rates.
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