Table 2.

Parameters and calibration targets.

Parameter	Value	Calibration target
β: discount factor	0.994	Exogenously chosen
ρ: relative risk aversion	2	Exogenously chosen
π: fraction of entrepreneurs	0.06	Annual fraction of investing firms = 0.24
η: curvature in leisure utility	1.525	Hours of work = 1/3
α: capital share	0.36	Labor income share $(1-\alpha )=0.64$
δ0: capital depreciation rate	0.016	Annual investment/capital = 0.065
δ1: slope depreciation function	0.013	Pinned down by steady state
δ2: curvature depreciation function	$0.33\times {\delta }_1$	Comín and Gertler (2006)
ϕ: resealability	0.095	Capital stock/annual output = 3.30
θ: mean fraction of new equity	0.095	Set equal to ϕ
ρd: persistence of preferences	0.95	Exogenously chosen
ρA: persistence of technology	0.95	Cooley and Prescott (1995)
ρθ: persistence of financial friction	0.95	Exogenously chosen
${\rho }_{{\sigma }_d}={\rho }_{{\sigma }_A}={\rho }_{{\sigma }_{\theta }}$: persistence of u.s.	0.75	Fernández-Villaverde et al. (2015a)
σd: volatility of preference u.s.	$\log (0.032)$	Fernández-Villaverde et al. (2015a)
σA: volatility of technology u.s.	$\log (0.007)$	Cooley and Prescott (1995)
σθ: volatility of financial friction u.s.	$\log (0.008)$	Guerrón-Quintana and Jinnai (2019b)