Which of the following is a characteristic of the 'Calibration' approach in quantitative macroeconomics?
A. Parameters are estimated only by maximum likelihood
B. Only theoretical consistency matters
C. No attention is paid to empirical moments
D. Parameters are chosen so that the model matches selected long-run averages or moments of the data
Answer: Option D
Solution (By JKSSB Mock Tests)
In the calibration methodology associated with real-business-cycle and dynamic stochastic general-equilibrium models, key parameters are set so that the model reproduces selected long-run averages or other empirical moments.
Explanation:
Basel norms (Basel I, II, III) are international banking regulations that set standards for capital adequacy, stress testing and market liquidity risk.
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