Let say we have 5 deep/structural parameters (\delta, \beta, \alpha, \rho, \sigma) and 3 variables (c_t, r_t, y_t) in our model. Does calibration targeting mean manipulating a subset of the parameters, say (\delta, \beta, \alpha) to get specific values for the rest of the parameters (i.e., \rho, \s…

Think about calibration as an extreme form of moment matching. Whenever you have a parameter affecting an object, you can set a target for that object and then choose the parameter to match the target for that objective. What exactly that target is, is up to you, the model builder.

What are calibration targets?

General DSGE Modeling

HelloDynare 5 September 2020 15:02 5

FYI:

There are ample materials on calibration in first few chapters.