I need to calibrate the size of shocks in my model. I looked at literature and in one of the papers that I read which had housing preference shock, labor disutility shock and technology shock, the author writes that they choose the absolute size of the shocks such that standard deviation of the output matches the standard deviation of HP-filtered US output in the period 1980-2015. I want to ask how to do this? I guess one can try to match the standard deviation calculated from data with the one obtained from model simulation but how exactly to do this? I am sorry I haven’t done this before. Is there an example that one can look at?
Often, this is done by trial and error rather than a formal matching strategy. But without a concise reference it is impossible to tell.