Interpretation of annual IRFs

Dear Dynare users,

I have a, certainly silly question about the interpretation of IRFs.

I have a non-linear model calibrated at a quarterly frequency and solved non-linearly with simul. I would like to simulate a series of shocks (Gas price and cost-push shock) in order to match a given annual GDP decrease.

Let’s say I want to calibrate the shocks in order to match an annual GDP drop of 2%:
-is my target reached if the % deviation is 2% after four quarters?
-or is my target reached if I annualize the % percentage deviation, and the % deviation in the first period is 2%?
-or should I directly annualize the variable in the .mod file?

I hope, I have been clear.

Thanks in advance

It depends a bit on your goal. But if your only restriction is that annual GDP drops by 2%, then you need to make sure your quarterly output in the model drops by 2 % on average during the first four quarters. The reason is that annual GDP is the sum of quarterly GDPs.

Thank you very much for your swift reply.

In fact, I am also targeting an annual inflation rate of roughly 8%. However, in this case, can I simply use 400*(\Pi_{t}-1), and interpret the IRFs as an annual percentage deviation?

Yes, that would be the proper way to annualize quarterly inflation.