# Confusion about the practical application of temporary and permanent shocks

**URL:** https://forum.dynare.org/t/confusion-about-the-practical-application-of-temporary-and-permanent-shocks/26318
**Category:** Stochastic simulations
**Created:** [25 August 2024 19:49 UTC](https://forum.dynare.org/t/confusion-about-the-practical-application-of-temporary-and-permanent-shocks/26318 "2024-08-25T19:49:39Z")
**Posts on this page:** 1
**Showing post:** 6

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### Author: ![jpfeifer](https://forum.dynare.org/user_avatar/forum.dynare.org/jpfeifer/32/5044_2.png) [@jpfeifer](https://forum.dynare.org/u/jpfeifer)
#### Post date: [27 August 2024 06:57 UTC](https://forum.dynare.org/t/confusion-about-the-practical-application-of-temporary-and-permanent-shocks/26318/6 "2024-08-27T06:57:34Z")

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See

> [@Basic rbc model with temporary and permanent shocks](https://forum.dynare.org/t/basic-rbc-model-with-temporary-and-permanent-shocks/4798/6):
>
> An alternative is to have both a stationary and a unit root shock in an undetrended model: var y, c, k, a, h, a\_temp, a\_perm; varexo e, u; parameters beta, rho, alpha, delta, theta, psi, tau; alpha = 0.36; rho = 0.95; tau = 0.025; beta = 0.99; delta = 0.025; psi = 0; theta = 2.95; phi = 0.1; model; c\*theta\*h^(1+psi)=(1-alpha)\*y; k = beta\*(c/c(+1))\*(alpha\*y(+1)+(1-delta)\*k); y = exp(a)\*(k(-1)^alpha)\*(h^(1-alpha)); k = (y-c)+(1-delta)\*k(-1); a = a\_temp+a\_perm; a\_temp=rho\*a\_temp(-1) +…

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