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:
- I wanted to apply a 10 percent shock. Does Stderr of 0.1 represent a 10 % shock.
- 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.