Hi,

I am sorry for my very basic question; I am a MSc Economics student and just started learning about RBC models and Dynare. I watched the video course RBC model: determnistic vs stochastic simlulations by Willi Mutschler and am confused regarding the timing of the stochastic shocks. Is the shock only enacted once at the initial steady state? I.e. the resulting IRFs show the impact of just one shock at the initial steady state? I ask this question because when I look at the model equations it seems the shock should apply every time period since the following is part of the model block:

[name=‘total factor productivity’]

log(a) = RHOA*log(a(-1)) + epsa;

Mod file:

@#include “rbc_nonlinear_common.inc”

steady;

% -------------------- %

% Unexpected TFP shock %

% -------------------- %

shocks;

var epsa = 0.04^2;

end;

stoch_simul(order=1,irf=30,periods=0) y c iv a;

Please enlighten me.