On the issue of variances

Stochastic simulations
1

Dear Professor:

Does the variance of the variable stored in “oo_. var” reflect the volatility of the variable from being impacted to returning to steady state?
Furthermore, is the variance of the variable in steady-state always 0?

Think you!

2

oo_.var stores the unconditional variance, i.e. the average variance if the economy is hit forever by shocks.

3

Thanks for your reply！

If the resilience of variable A is defined from the two aspects of “initial fluctuation after shock” and “speed of return to steady state”, that is, the smaller the initial fluctuation of variable A caused by shock and the faster A returns to steady state, the better the resilience of variable A will be.
So can the variance of A in oo_. var be used to approximate the resilience of A？

Thanks again!

4

If that is your definition of resilience, then the answer should be yes. Both the initial shock size and the persistence are captured by the unconditional variance.

5

Thank you again!