Dear Prof. Pfeifer,
thanks a lot for your helpful guidance in this forum Its truely great that you answer all these questions! I hope that mine can be answered quickly.
I have a model in non-linear form without any exp() substitution. Some of my endogenous variables are ratios of two variables as for instance
Am I right to assume that, when entering the model in non-linear form without the exp() substiution and doing a first order approximation, Dynare produces IRFs that can be interpreted as level deviations from steady state?
- IRF_of_A = New_Level_A - Steadystate_A;
- IRF_of_B = New_Level_B - Steadystate_B;
I simply have to divide these IRFs by the steady state in order for them to be interpretable as deviations from steady state am I right?
Lets say I would like to back out the IRF of the “Ratio (A/B)” from the two IRFs of A and B in 2) and 3)
Am I right to assume that I could simply do the following
IRF_of_Ratio=(IRF_of_A+Steadystate_A) /. (IRF_of_B+Steadystate_B) - Steadystate_Ratio;
And would this give the same result that I would get from Dynare if I were to directly extract the IRF of the ratio after running the mod-file? I guess not because dynare also linearizes equation 1)?