Hi,

I have a question regarding the theoretical mean computed by dynare for second order accurate solutions.

The moments are either automatically supplied as part of stoch_simul or can be accessed via disp_th_moments(dr,M_.endo_names). I am wondering how the second order correction is computed and where (it appears that the correction is displayed in oo_.gamma_y{8})?

The particular problem that I am grappling with is that the theoretical means computed in my case look very weird. I am working on a symmetric two country model and find that the mean of the variables is not symmetric, e.g. the mean of output yh is -6.7401 and yf 9.1625 . This also shows the second problem which is that the theoretical mean in the first case does not make any sense, as it is negative.

I have to admit that I do not even clearly understand why we should have a correction term at the second order anyway. I mean I have read bits that said it’s a shift due to the variance of future shocks and such like, but nothing that actually explains why, so any pointers there would also be most welcome.

My particular model is somewhat too long to be displayed here, but at least the question about non symmetry appears to be more general - I attach a file used by Colacito et al to illustrate the use of Matlab. It’s a simple two country model and the theoretical moments are still not symmetric.

Many thanks for your help,

macrodyn

TwocountryApprox.mod (841 Bytes)