Dear all,

due to the ongoing difficulties with explosive simulations with second order approximations, I introduced the option for the pruning algorithm in Dynare 3.065 described in Kim, Kim, Schaumburg and Sims (2005): “Calculating and using second order accurate solutions of discrete time dynamic equilibrium models”

In order to use it correctly under Windows, please proceed as follows:

- Download the simult_pruning.m file in the attachment to the Dynare directory, generally under …\dynare_v3\matlab.
- Rename the file simult_.m to simult_old.m
- Rename the file simult_pruning.m to simult_.m
- Just before the stoch_simul() command within your Dynare model file *.mod add the line

`options_.pruning=1;`

If you want to compare to the standard simulation just take out the line or set options_.pruning=0;

5. Enjoy the simulation results

Just to let you know how the last lines of a mod-file might look like:

[code]

model;

…

end;

initval;

…

end;

steady;

shocks;

var e_x=std_x^2;

end;

options_.pruning=1;

stoch_simul(irf=15, replic=100)y c w k;[/code]

A word of caution: Obviously, it is not assured that the new version of simult_.m is bug free, though Michel had a look at it. Counter check your results! This may be done by using smaller shocks and comparing the results with and without pruning. They should be similar. In addition, pruning is often necessary due to large shocks, which implies that even a second-order approximation may be not good enough and results may be inaccurate due to the distance from steady state.

Any further suggestions or found errors, please post on this forum.

Stephan

simult_pruning.m (2.84 KB)