I am trying to use dynare to compare the non-linear solution I have to a model (computed with other tools) to the behavior of a linear solution. The paper is about interactions between fiscal and monetary policy, and we are trying to determine when nonlinear methods are needed to capture such interactions.

The model has a standard New Keynesian monetary policy rule where the nominal interest rate responds to inflation. We want to quantify the impact of 1. a fiscal transfer and 2. the combination of a fiscal transfer and a temporary deterministic change in the monetary policy rule.

We currently are using varexo_det to temporarily change the coefficient in our monetary rule on inflation, and I am wondering whether such a parameter change is itself linearly approximated in a first-order stochastic simulation, or whether the parameter change itself is computed exactly (which would result in a different transition matrix for our linearized model before and after the parameter change). Is there a description somewhere of what numerical methods are used when varexo_det is called? Perhaps initval and endval would be another approach we could use instead, or histval?

This detail I think matters quite a bit for whether our linear solution would allow for interactions between monetary and fiscal policy that interest us (or whether they are assumed away a priori).

(The full paper is here, solved with nonlinear methods, but we are less familiar with dynare. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4283119 )