Standard Errors for Calibrated Parameters

Matthew Cocci and Mikkel Plagborg-Møller
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Matthew Cocci: Princeton University
Mikkel Plagborg-Møller: Princeton University
Authors registered in the RePEc Author Service: Mikkel Plagborg-Moller

Working Papers from Princeton University. Economics Department.

Abstract: Calibration, the practice of choosing the parameters of a structural model to match certain empirical moments, can be viewed as minimum distance estimation. Existing standard error formulas for such estimators require a consistent estimate of the correlation structure of the empirical moments, which is often unavailable in practice. Instead, the variances of the individual empirical moments are usually readily estimable. Using only these variances, we derive conservative standard errors and confidence intervals for the structural parameters that are valid even under the worst-case correlation structure. In the over-identified case, we show that the moment weighting scheme that minimizes the worst-case estimator variance amounts to a moment selection problem with a simple solution. Finally, we develop tests of over-identifying or parameter restrictions. We apply our methods empirically to a model of menu cost pricing for multi-product firms and to a heterogeneous agent New Keynesian model.

Keywords: calibration; data combination; minimum distance; moment selection; semidefinite programming (search for similar items in EconPapers)
JEL-codes: C12 C52 (search for similar items in EconPapers)
Date: 2021-09
New Economics Papers: this item is included in nep-dge and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:pri:econom:2021-20

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