Non-symmetric IRFs in recursive utility

Luce · August 24, 2024, 10:57am

Dear friends,
I try to investigate the economic dynamics under recursive utility set in the paper Caldara et al. (2012). I use the code shared by prof.Pfeifer from his homepage.
I omit the volatility shock and focus on level of productivity shock. I set calculate the IRFs to one positive standard error shocks and one negative standard error shocks under the order=3.
In theory, as I take 3 order perturbation, the irfs to positive and negative shocks will be different, but the code present that they are same. My question is that, should they be different or same? If it is different, how can I get the result? If it is same, how to explain?
Caldara_et_al_2012.mod (5.8 KB)

jpfeifer · August 25, 2024, 11:24am

They should not be the same. See

github.com

JohannesPfeifer/DSGE_mod/blob/master/RBC_state_dependent_GIRF/RBC_state_dependent_GIRF.mod

/*
 * This file uses a basic RBC model with government spending and TFP shocks to
 * demonstrate how to compute Generalized Impulse Response Functions using 
 * Dynare's simult_-function. The model is solved up to second order to allow 
 * for non-linearities.
 * 
 * Two exercises are considered:
 *      1. A comparison of the absolute output response to a 1% of GDP shock that is either 
 *          positive or negative. The positive/negative shock is imposed at the ergodic mean.
 *          It shows that in nonlinear models, the sign of the shock matters.
 *      2. A comparison of the absolute output response to a positive 1% of GDP 
 *          shock at the ergodic mean and when capital is 10% below the steady state.
 *          It shows that in nonlinear models, the point in the state space where the shock happens 
 *          matters.
 *
* 
 * Notes:
 * - This implementation has been tested with Dynare 5.2
 *
 * This implementation was written by Johannes Pfeifer.

This file has been truncated. show original

for code how to generate state dependent IRFs.

Luce · August 25, 2024, 12:19pm

Thank you very much!