Percentage points or absolote deviationsst

[mehranmahmoudi]

mccullam.mod (6.7 KB)
hi,this is my code in dynare. I dont know how interpret the values on irf in my code.percentage deviations from ss or absolute deviations from ss.all equations is non linear and i use order=1 in stoch_simul.i need help.
thanks

[jpfeifer]

Looking at your code, you are having absolute deviations from steady state. If you want percentage deviations, see

Question about understanding irfs in dynare

To be more precise: it depends on how the variables in your model are measured. As @stepan-a says, Dynare conducts a linearization. If you for example have a nonlinear model and your model variable is simply the level of output, the IRF will measure the difference between the variable and its steady state (or its mean at higher order). This is the case with https://github.com/DynareTeam/dynare/blob/master/examples/example1.mod In contrast, if your model variable already measures percentage…

[mehranmahmoudi]

Ok,thanks.as you can see I write shock as var kisi2=(0.1)^2.can I say 10%increase in energy prices lead to 40%increase in inflation?

Question2:after use log(pi)as variable and plot it’s irf,suppose first time reaction is 0.4.it means 0.4%increase in inflation or 40%increase in inflation.

Question3:I know this question might be not make sense for you.but in your point of view when we increase 10percent in energy price approximately what percent increase in inflation we have? Numbers under 10%is logical or above10%.
Thank you jpfeifer.

[jpfeifer]

Which variable in your model is inflation? If it’s pay, then the impact response is 0.006. As pay is already measured in net percentages, a 10 percent increase in p_ef increases the per period inflation by 0.6 percentage points. That would be consistent with evidence discussed in Energy shocks in the Euro area: Disentangling the pass-through from oil and gas prices to inflation - ScienceDirect