Dear All, I am estimating a model which includes labor force participation.
I have this functional form
h(Lfp_t)=\big[\frac{\psi}{1+1/\iota} \big](Lfp_t)^{1+\frac{1}{\iota}}
I use two observables two estimate two shocks process and one parameter.
I want to get target volatility of Lfp in the simulation after I get estimated shocks and parameter but I couldn’t find an automatic way of doing it. Target volatility of Lfp will be acquired using a value for \iota . When I estimate the model by using an arbitrary value for \iota , and then change the value to get target volatility in the simulation, some problems come up because estimation is affected by the value I choose in the first place.
Is there any way of doing this without change the value manually ?
Thank you