To all:

Currently, Dynare does not calculate finite horizon variance decompositions. I did want to ask if there was a straightforward way of calculating them in Dynare.

In particular, would the following trick do the job, or, if not, can someone suggest a better method?:

Suppose we want the 8 period ahead var. decomp of GDP.

- Define a new variable GDPe8 = GDP(+8) (i.e. E(t)GDP(t+8))
- Use that to define GDPerr8 = GDP - GDPe8(-8)

(i.e. GDP(t) - E(t-8)GDP(t)) - Decompose GDPerr8, which should be the forecast error on GDP given information up to t-8–I think!

Thank you all for your time and help.

Paul Corrigan

pcorrigan@bankofcanada.ca