Problems on shock equation

Dear Professor Pfeifer,

I have a policy variable x_t in the model, and I set it as x_t=0 in the benchmark. Then I want to add a permanent shock to it and see the irfs. I use x_t=x_{t-1}+e_t to realize this, in which e_t is the noise.

  1. If I mean to consider the situation that x_t change from 0 to 0.05, does it imply that I should set the std of e_t as 0.05 in Dynare ?

  2. I use exp() form for other variables of the model in Dynare. However, as the steady state of x_t is 0, should I use x_t instead of exp(x_t) in Dynare?

Thank you for your time on this.

  1. If you are at order=1, then yes, as Dynare will by default present IRFs for a one standard deviation shock.
  2. Yes.