Bayesian IRF Matching - Inflation vs Price Index

Estimation ML/Bayesian estimation
1

Hi,

Thank you so much for integrating BIRF Matching into Dynare. One of the IRFs I would like to match is CPI. The model obviously does not have CPI but it has inflation. Normally, this is not an issue because I would simply cumsum(inflation) to get IRF for CPI. I was wondering whether Dynare IRF matching has a similar feature, where we can modify the IRF variable.

Thanks!

2

Unless there is a trend, you can simply define the CPI via its link to inflation. Dynare should then take care of the rest.

3

Thanks so much for your swift response. Could you be more specific? The model has a trend but the shock does not influence it. What I would like to do is to match data IRF of CPI to model IRF of cumsum(inflation). How can I do that?

Thanks!

4

In your model, you can define

CPI=P/P(-1);

and the simply use the IRF of P. That only does not work if you have trend inflation.

5

Sorry: CPI is log(P) itself. In the model I have Pi = P/P(-1).

Impulse response to log(P) is equivalent to impulse response to cumsum(log(Pi)). I just want to make a modification after the model generates IRFs to match the data.

6

Then define
log_P=log(P);