I know there are no recipes to make calibration, but I would like to learn from your experience.
I am trying to replicate a simple model like the one in the book of Cooley 1995 (Ch. 7). I mean a CIA monetary economy and then compare the detrended series performance (correlations and variances) with the real data of one country.
My doubt is: How should I treat the series in order to use them to calibrate?
For example. for the simplest case: the calibration of “rho” in an AR(1) process for the technological shock.
It is not difficult estimate rho from : z= rho*z(-1)+ e
But I have some alternatives:
- use the trend of z?
- use cycle of z?
- use the variable without transformations?
Which one is more plausible or more used empirically?
Thank you in advance.