function [param target]= calibration
% Specify calibrated parameters and steady values to target
%---Preference parameters
sigma = 0.05;   % subjective discount factor elasticity to consumption
delta=1-0.0272; % survival rate of entrepreneurs (quarterly) [Benanke, Gertler and Gilchrist, 1999]
eta = 1;       % Inverse Frisch elasticity of labor supply [Kimball and Shapiro,2008]
Psi = 4.6;       % utility weight on leisure, to target labor supply l

%--Technology parameters ---
alpha = 0.5;  % cost share of labor in final good production 
psi=0.5;%cost share of labor in intermediate good production
A=1.16; %TFP in final good production, average Sales-COGS ratio of private industrial firms from 2003-2012
z = 1.23; %TFP in intermediate good production, average Sales-COGS ratio of state-owned industrial firms from 2003-2012

%---Foreign interest rate---
r_star=0.02;%world real interest rate 

%--Policy Parameters ----
tau_f_star=-0.05; %income tax rate for capital inflows
tau_star=0.2; %income tax rate for capital outflows
tau=0.2; %domestic capital income tax rate
theta=0.3;%tightness of domestic constraint, average current liabilities-sales ratio of private industrial firms from 2003-2012
phi=0.5; %relative tightness of international constraint [Aoki, Benigno and Kiyokaki, 2009]

%--steady state values to target (use sigma, Psi)-----

%nx_GDP_ratio=0.03; %Averag net export-to-GDP ratio =0.06 from 2004 to 2012
fa_GDP_ratio=0.6; %Averag gross foreign asset-to-GDP ratio =0.6 from 2004 to 2012
l=0.4; %labor supply as fraction of time endowment

%param = [sigma, delta, eta, Psi, alpha, psi, A,z,r_star,tau_f_star,tau_star,tau,theta,phi];
param = [delta, eta, alpha, psi,A,z,r_star,tau_f_star,tau_star,tau,theta,phi];
target=[fa_GDP_ratio l];
end


