Hi,

I have estimated a terms of trade process (AR(1)) with persistence 0.86 and std dev. 4.89%. In my model im imposing a tot shock, and am simulating the model 200 times and then taking the average of moments. For the stochastic process of tot in my model, i have set rho = 0.86. Then my question is how i do choose the standard deviation of the innovation to the terms of trade process such that the std of the tot from my simulated series matches the one in the data.

Please help my thesis is due soon.