Hi, everyone. I am a new learner of DSGE and I have some questions about average welfare loss per period, which is
- From the equation I can see that no matter the shock is positive or negative, the welfare loss is the same (since the var(x) is always positive and the IRFs is symmetric). So I feel it strange. Does this result means no matter the shock is good or bad, it will evantually damage people’s utility?
- In dynare, I directly use oo_.var(i,i) to get var(y) and var(pi), and I found whether I write order=1 or order=2 in stoch_simul. The results are the same, so does it means the approximation order makes no difference when calculating the average welfare loss per period?
Hope someone can answer my questions. Thanks!