First thank you very much for your previous helpful guidance, I am grateful.
I have a question, I have decomposed observed variable’s historical dynamics into shocks (shock_decomposition command in Dynare), I mean my graph measures how these shocks contribute to the an observed variable’s deviation from its steady state over time.
I have also plot forecast error variance decomposition for the same observed variable.
I find some shocks contribute only a little to the observed variable’s historical deviations from its steady state, but contributes a lot to forecast error variance decomposition. I am wondering is this normal? if not, what kind of problems this may indicate?
Thank you very much and look forward to hearing from you.