One period MIT shock in Basic NK_deterministic model

General DSGE Modeling
1

Hi Everyone!

I have a basic 3 equations NK model with 3 endogenous variables. You can check the uploaded document. I want to implement one period of MIT deterministic shock. So I use the following code for a negative supply shock

shocks;
var ep_s;
periods 2;
values -0.2;
end;

So my first question is this correct way to implement MIT shock?
Second, if I want to have now only demand shock then I set this shock to zero and implement demand shock?
Third, now I want the effect of booth demand and supply shocks. keeping both the shocks will do the job?

Basically I am trying to get COVID-19 shocks in NK model! NK_MITshock.mod (509 Bytes)

2
  1. No, the shock you implement happens in period 2, so it will be anticipated for one period.
  2. Yes.
  3. Yes.
3

So to correct it I give the shock in period 1? if not then how should I go about it ? And after shock do I have to use command “check; steady;” second time or is it unnecessary ? The first time we do is before the shock.

4

Yes, it should be period 1. check; is never necessary. Don’t use steady after the shocks block. For perfect foresight simulations, it only has a purpose after initval and endval (see the manual).

5

Perfect! Thank you so much!