I am trying to understand how is working the “conditional_forecast_paths” command after estimating the Smets&Wouters (2003) model.
My issue is that the variable that I conditionned to a specific values (0.5 in the code, but I tried different one 0, -0.5…) is not to that specified valued from what I see on the graph. The commands that I am using is the following:
conditional_forecast_paths;
var R ;
periods 1:12;
values 0.5 ;
end;
conditional_forecast(parameter_set = posterior_mean, controlled_varexo =(ETA_R), replic = 1000);
plot_conditional_forecast PIE Y R;
Could someone help me to interpret this ?
I am attaching the code and the data that I am running (not the code, because it seems not possible to upload .mat file). I hope this is enough.
Thanks,
I forgot the data that I am attaching now. The values that I obtained for the interest rate (obtained from forecasts.cond.mean.R in the file conditional_forecasts.mat) using the previous command are the following:
-0.5012
-3.6607
2.2032
0.9611
0.4577
0.2881
0.1271
0.1094
0.0553
0.0310
0.0033
0.0052
-0.0028
-0.0109
-0.0200
-0.0319
-0.0426
-0.0503
-0.0491
-0.0687
-0.0827
-0.0858
-0.0885
-0.0850
-0.0833
-0.0788
-0.0846
-0.0847
-0.0761
-0.0748
-0.0810
-0.0860
-0.0808
-0.0777
-0.0781
-0.0724
-0.0629
-0.0545
-0.0497
-0.0555
-0.0559
I still don’t understand why R hasn’t been at any periods to the values that was imposed. If anyone has some explanations for me, it would be greatly appreciated.
Thanks,
Ok, I think I understood my problem, but still not the exact reason. It seems that Dynare is not imposing the constraint on the appropriate variable.
My var are defined as follow:
"var PIE R Y …"
If I want to imposed a path on robs and I write:
conditional_forecast_paths;
var R ;
periods 1:12;
values 0.5 ;
end;
The constraint will be imposed to PIE instead of R. And, if I set the path as:
conditional_forecast_paths;
var Y ;
periods 1:12;
values 0.5 ;
end;
The constraint will be imposed to R instead of Y (That’s how I wrote my constrint on the interest rate path). And so on…
I don’t know how Dynare 4.2.4 build the variables list, but it seems that it is forgetting the first variable in this case. I don’t know why, but hope it could be of use for someone…