How to do a calbiration?

General DSGE Modeling
2

In a quarterly model with a zero inflation steady state,

  1. a four percent interest rate implies \beta\approx 0.99
  2. a ten percent markup implies \varepsilon=11 as the gross steady markup is \frac{\epsilon}{\epsilon-1}
  3. five months average price duration is 1.6667 quarters. With \theta=0.4, the average price duration 1/(1-\theta)=1.6667
  4. You need to make the slope of the PC equal, i.e. \frac{\varepsilon-1}{\gamma}=\frac{(1-\theta)(1-\beta\theta)}{\theta} and therefore \gamma =\frac{(\epsilon-1)\theta}{(1-\theta)(1-\beta\theta)} which should be 11.0375

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