Hi,

I want to get the transition path for initial TFP process (exogenous variable) with 0<rho<1:

when the process changes permanently in period 2 (and this is known in period 1) to:

What i did is the following:

[code]model block: z = rho*z(-1) + sigma + eps*sigma; (the NEW process)

initval: z = 0;

endval: z=(1-rho)*sigma;

shocks in eps:

periods 1 2:1000;

values -1 0; %the -1 is to keep z(1)=0;[/code]

When I get the results I see that z(2)=sigma/(1-rho); What did i do wrong? I thought it would calculate: z(2)=rho*z(-1) + sigma = sigma; but id doesnt. I havent used steady either.

(I know that I could get the correct result by setting the initval: z=0 and then add a shock eps=1 for period 2:1000, but i want to understand how to model it with initval and endval)

Thanks for your help!