Hi
these are 2 unrelated questions:
-
i saw in an old post that unrealized news shocks could not be modeled in 2006. is it possible to do so with the current version of dynare?
Unrealized expectations -
why does it make a difference if I enter a shock either in a linearized form or not.
The shock in the unlinearized system is (the secondline is the persistent shock):
Y=Error_A_Per*L;
Error_A_Per = Error_A_Aux*Error_A_Per(-1)^0.66;
Error_A_Aux = exp(Error_A - 0.00125 );
var Error_A = 0.0025;
This is a lognomally distributed, persistent shock with expected value 1.
In the linearized system it is (the secondline is the persistent shock):
Y=Error_A_Per*L;
Error_A_Per = Error_A_Aux +1;
Error_A_Aux = Error_A + 0.66*Error_A_Aux(-1);
var Error_A = 0.0025;
This is a standart AR(1) shock with expected value 1.
I had expected that i woulndnt matter whether i use the first or the second specification, as log-linearizing the first gives the second.
Yet the Steady state values of the model I use change a little (1%) when i change the specifications and so do the IRFs.
Is that just due to rounding errors?