Dear all,
Sorry to bump this old post up, but it’s exactly related to my issue. I am trying to use Stéphane’s method to deal with correlated shocks so that I get similar impulse responses, whatever the order in which I declare them.
So basically, I had e1, e2 two correlated shocks, to which I want the impulse responses. And I transformed them as follows:
e1 = u12 + u1;
e2 = gamma12*u12 + u2;where u12, u1 and u2 are now exogenous, uncorrelated shocks, e1 and e2 are endogenous var, and I choose the gamma and the variances so that it matches the initial variances I wanted.
e1 and e2 are then used in the following processes:
z1 = rho1*z1(-1) + e1;
z2 = rho2*z2(-1) + e2;That works. But my problem is, how could I now recover IRFs of z1, z2 (and other endog variables) to e1, e2, and NOT to u1, u2, u12, as Dynare provides? The idea would be that a shock to e1 <=> shocks to u1 & u12 combined, and similarly for e2. Do you think this is possible at all? I read a few threads where you, Johannes, explain that we can sometimes define a “common shock” and that can do the trick to gather shocks, but I don’t really see how to apply this here.
If I don’t find a solution to that, I’ll just generate IRFs to e1, e2 declaring them first in this order, and second, in the inverse order. My goal is simply to get “similar” (or symmetric rather) IRFs.
I may also very well completely miss a point as I’m fairly new to Dynare. Any thoughts?
Thanks a lot,
Maxime.