Dear Forum members,
I am trying to run a second order stochastic simulation using a previously estimated model.
As far as I understand, stochastic simulations of both orders should work, but I get some terrible “explosive” IRFs.
On the other hand, IRFs for the first order stochastic simulations look ok.
Did anybody find a similar problem?
Thanks for any help,
it is perfectly possible for a second order simulation to be explosive. There is no condition I know off that permits to tell in advance.
The only solution would be to use Chris Sims’ pruning algorithm, but it isn’t implemented yet in Dynare
For Dynare 3.065 there exists now a code for pruning. Have a look at the thread:
NB: *new url