dynare.org/manual/index_18.html
In deterministic simulation, we specify a permanent shock by the use of initval and endval.
But how to specify a permanent shock in stochastic simulation?
Thanks!
dynare.org/manual/index_18.html
In deterministic simulation, we specify a permanent shock by the use of initval and endval.
But how to specify a permanent shock in stochastic simulation?
Thanks!
Even though you have a permanent shock, you should type your model in stationary terms, otherwise it cannot be solved. I am not sure if that helps…
I am also wondering : how to specify a permanent shock in stochastic simulation? Is there a good example?
Hi rosa,
z = z(-1) + zg;
zg=rho_z*zg(-1) + eps_z;
What @cmarch provided is a very general example of a unit root process with an autocorrelated shock. Generally, you would simply need to have a shock follow a random walk, i.e. the process needs a unit root.