Dear all,
I have a question regarding interpreting the results in models solved with Newton-type method, i.e. the model is solved deterministically (agents have perfect foresight).
I sometimes find that as the shock pattern changes (such as the same shock but appears several more periods), the IRF dynamics become totally different qualitatively. How should I approach/interpret this difference, given that the equilibrium conditions and parameter values do not change at all?
Could I just say that because there are additional shocks in the system and agents have perfect foresight, they determine their jump variable paths differently starting from the first period, given all the information? (and tell some intuitive/anecdotal/informal stories based on the model and meanings of equations and shock)
Thank you in advance.