On Third-order perturbation with stoch_simul

Hello, I have been working on inflicting a volatility shock in a two country New Keynesian DSGE.

I have been using stoch_simul function with order set to 3 for that purpose, and the impulse response functions seem to be wiggly.

I also looked at the example code provided by Professor Pfeifer on his GitHub, and I am having trouble understanding the difference between the two simulation methods.

Could anyone clarify the differences between the two methods, or explain why the IRFs obtained from stoch_simul appear wiggly?

Thank you for your time. I attach my codes.

DSGE_Corsetti.mod (6.7 KB)

Did you search the forum, e.g. Third order perturbation

Thank you for your reply. Yes, I have read the discussion in that page, but what I am curious is the reference point that stoch_simul function generates GIRFs from.

If the generated IRFs by stoch_simul are not deviations from the stochastic steady state, as in Basu and Bundick (2017), what do the deviations signify?

Thank you.

The Basu/Bundick ones are (like most papers) at the stochastic steady state (\approx the mean without any shocks). The GIRFs are at the ergodic mean, i.e. the mean with shocks.

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Thank you for your clarification!