Hello everyone!

I hope you all are having a good summer. In my case, I am utilizing this summer for learning about estimation in dynare in depth. For that purpose, I am working on paper by Smets and Wouter (2007) and Del Negro et al. (2013). I do have a question, which might sound weird.

While estimating the Smets and Wouter (2007) model, I get shock decomposition graphs of variables in flexible model and that in sticky model separately. Is there any dynare code, which we can write in the model so that we get those graphs in one single picture, i.e., single graph for sticky output and flexible output?

I want to study how contributions of exogenous variables change over the time when flexibility and stickiness are considered.

Thank you very much!

Niraj

No, you would need to plot this manually based on the results in `oo_.shock_decomposition`

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Thank you, professor, very much for your answer. I again do have another question regarding Smets and Wouters (2007) paper. I know that the steady state values of endogenous variables are zero as they are expressed as deviations. Therefore, the smoothed variables obtained after estimations are the deviations of variables from their respective steady states. Is it possible to estimate the time-series of variables in level, e.g. Y (GDP in level, not deviation) and its steady state using the same model?

Thank you very much!

Niraj

That can be done by defining auxiliary variables that store the levels of the variables. The steady states of the levels can be computed based on the parameters defined in the model. Multiplying these levels with 1 plus the percentage deviation yields the level.