Hallo everyone
I have a question related to impulse response function as following
my model has 5 shocks. But I would to conduct the impulse response function of some variables in my model with respect to the monetary policy shock and turn of the other 4 shocks. How I can do that in Dynare?
Thank a lot
Best regards
Hi Peter,
The definition of impulse response is the effect of one standard deviation shock to the variables in your model, shutting all other shocks down. Hence the impulse responses with respect to the monetary policy shock you have found are only associated with that shock.
Best,
Stelios
yes, exatcly as the thing you say. I thank you a lot for that
but how I do that in Dynare, shutting 4 shocks out of 5 shocks, keeping only monetary shock in Dynare
@st348’s answer is only partially correct. At order=1 there is no interaction between shocks and the IRFs are generated by considering only one shock at a time. Thus, for each displayed IRF, all other shocks are set to 0. If you dislike the IRFs to other shocks being displayed, consult the manual on irf_shocks
Things are more complicated at order>1 as there are now interactions between shocks. Dynare provides Generalized Impulse Response Functions (GIRFs) in this case where other shocks averaged out (see Koop/Pesaran/Potter 1996). If you have a particular type of GIRF in mind where the conditioning set involves setting all other shocks to 0, you would need to use the simult_-function to do the simulations manually.