# IR to a negative shock

Hi,
is it possible to plot the response to a negative 1 standard deviation shock? How?
Anton

Hi,

Yes it’s possible. You just have to define an auxiliary variable. For instance, if epsilon is your exogenous variable, you can create an endogenous variable EPSILON such that EPSILON = -epsilon.

With an approximation at order one, the response to a negative shock is minus the response to a positive shock.

Best,
Stéphane.

[quote=“nakov”]Hi,
is it possible to plot the response to a negative 1 standard deviation shock? How?
Anton[/quote]

Hi, thanks,
I was referring to 2nd order approximation in which responses to shocks can be asymmetric. But I guess a similar trick may be applied - the shock process can be redefined such that the innovation enters with a minus sign. In that case a positive 1 standard deviation of the innovation would be like a negative shock, am I right?

Yes, that is the idea

Best

Michel

Thanks a lot!
Anton

[quote=“MichelJuillard”]Yes, that is the idea

Best

Michel[/quote]