Interpretation of irf with respect to shock

Stochastic simulations
1

Hi!

I am rather new working on DSGE modelling and suing dynare. Want help on interpretation the irf corresponding to the stochastic shock. My model is in a log linear format and I have two shocks to government investment and government consumption as shown below:

var epsilon2; stderr 0.1;
var epsilon3; stderr 0.1;

I have two queries:

  1. I wanted to apply a 10 percent shock. Does Stderr of 0.1 represent a 10 % shock.
  2. How do I interpret the IRF. If the first value of output on vertical axis is .004, does it mean output increases by .004 % or 0.4% above steady state?
    Attached is my mod file. India2704.mod (1.9 KB)

Thanking in advance.

2

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