Impulse response functions and shocks

Hi all,

Just wanna make sure are IRFs in dynare computed based on (positive) one standard deviation shock? i.e. say the monetary policy shock is actually a contraction shock (which brings down output, consumption etc.) in the IRF plots reported by dynare?



Dynare always takes a one standard deviation shock by default. If you shock enters with a plus sign, e.g.

this will be a positive shock (however, in a Taylor rule, this would have the interpretation of a contractionary, often called “negative”, shock). If you want a negative shock, write

i.e. enter the shock with a minus sign.

Got it. Thanks a lot.