I’m currently working on a tariff uncertainty shock, but I’ve encountered a problem with my impulse response functions.
When I impose a one-unit positive shock to tariff uncertainty, the tariff uncertainty variable itself decreases in the IRF. Moreover, output, exports, and consumption all increase, which is the opposite of what I would expect theoretically. I’m not sure whether there is something wrong with the way I have specified or implemented the shock.
The tariff uncertainty shock is specified as follows:
tau=(1-rho_tau)+rho_tau*tau(-1)+exp(sigma_tau(-1))*eps_tau;
sigma_tau=（1-rho_sigma_tau)*sigma_tau_bar+rho_sigma_tau*sigma_tau(-1)+sigma_sigma_tau*eps_sigma_tau;
shocks;
var eps_tau=1;
var eps_sigma_tau=1;
end;
