Hi!
I now have a model where I want to analyze the path of endogenous variables in the following scenario: interest rates remain steady for two periods after a positive productivity shock and a positive demand shock occur simultaneously.
What should I do?
I read this code: DSGE_mod/NK_linear_forward_guidance at master · JohannesPfeifer/DSGE_mod · GitHub
, but it doesn’t seem to be consistent with what I want to do? Can it be implemented in this code?
I am eager to know how to achieve, thank you in advance.
Yes, that can be implemented by this code. But you need to make sure you have the right number of shocks to be chosen in order to induce the desired path of the endogenous variables. Usually, you need a shock for each variable you want to control at each horizon you want to control.
Thanks for your reply! Do I need to introduce shocks to each endogenous variable?
No, in typical models, almost all exogenous shocks have a contemporaneous effect on all endogenous variables. You need to decide which shocks are used to control/set the value for the endogenous variables.