Monthly parameters calibration from quarterly values


For most of the parameters, it is easy to find the equivalent monthly calibration of quarterly calibration. However, I’m having problems with the transformation of 2 parameters : the habit formation (h) and the adjustment cost in investment (\kappa).

For the first the quarterly equation is:

U(C_t (j)) = log(C_t(j) - hC_{t-1}(j))

For the second one the equation is:

f\left(\frac{I_t}{I_{t-1}}\right)= \frac{\kappa}{2}\left( \frac{I_t}{I_{t-1}} - 1\right)^2

Usually, quarterly calibration of these values are h=0.7 and \kappa=5. Any ideas which are the equivalent of those for a monthly calibration?

  1. The habit parameter is akin to an autocorrelation. So when going to monthly data, I would expect something like the third root, i.e. about 0.9 for 0.7 in quarterly data.
  2. You may want to have a look at
    Investment adjustment costs in annual frequency