My partner and I are both undergrads. trying to complete an extracurricular research project and need to update parameters for our model. Our advisor is out of country and we have minimal/spotty contact with him.

We have constructed our own model and found most information (we are reproducing his work and adding a few new things) on our own but we aren't sure how to calculate. Here are the things we are looking for:

Everything below is for use in a limited participation model:

Beta Value for a discounted utility model - The current paper uses a beta value of .988. I know what this is and why we use it but I am not sure how to calculate this number. My assumption is that this is 1-real interest rate. Can anyone confirm this? I know his numbers are a bit outdated.

Capital depreciation rates - Again, I know what this is but am unsure of how to calculate an accurate value. Current model uses .025.

adjustment cost on capital - This is given as .01. I assume this is the cost associated with adjusting capital stock etc. Again...not sure how this was calculated.

standard deviation of technology shock - This is given as .0081. no idea how to calculate this.

Autocorrelation of technology shock - given as .95. No idea how to calculate this.

These are the few things we are not sure how to calculate. We've read through his other papers also and found that he cites other work for the values he uses but are unable to find that paper to determine how that author calculated the values.

Does anyone here have any good ideas about how we might calculate these values so we can calibrate this model to the American economy?

Any help, suggestions, hints, tips, literature suggestions etc. are very very very much appreciated.

  • 1
    $\begingroup$ Could you post the name and author of the paper you are trying to replicate? If you are trying to solve a DSGE/OLG model for instance then many of the deep structural parameters are set according to what other research papers have estimated these to be. Therefore you would not estimate these yourself but would use previously estimated values. $\endgroup$
    – Plissken
    Feb 13, 2015 at 20:05
  • $\begingroup$ I don't think that he necessarily needs to add a specific paper. I think generally this is a good question, "How to calculate an estimate for this/these parameters in a model?" One could possibly debate this is more than one question and should be split though. $\endgroup$
    – cc7768
    Feb 13, 2015 at 20:59
  • $\begingroup$ Sorry for rushed nature of this question. I will clean this up and respond once I am home. $\endgroup$
    – 123
    Feb 14, 2015 at 3:21


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