var logdv_Y; parameters sig_Z rho_Z; varexo eps_Z; sig_Z = 0.01; rho_Z = 0.5; model; logdv_Y = logdv_Z + logdv_L; logdv_Z = rho_Z*logdv_Z(-1) + sig_Z*eps_Z; //shock process end; shocks; var eps_Z; stderr 1;
I have all my structural equations in log-linearized form (log-deviations). So let’s say I want to see the effect of a 0.01 standard deviation tech shock (I just simplified the system of equations just to show the interaction between Y and Z).
If for POLICY AND TRANSITION FUNCTIONS, I get
0.009935 for the effect of esp_Z on logdv_Y, can I interpret as
“a percent shock to technology brings about a 0.0099% increase in output”? I am trying to see if I can interpret “one standard deviation shock” as “one percent shock” if the equations are log-linearized, and how the coefficient should be interpreted accordingly.