Question on conditional variance series

Dynare help (legacy posts)
1

Hello everyone/Dr. jpfeifer,

I was solving a standard DSGE model, and I was looking for conditional variance of endogenous variables, like var(y_{t+k}|t) with respect to different horizon k.

As Dr. jpfeifer suggested in [Conditional variance), I changed conditional_variance_decomposition.m to get the conditional variance series.

My aim is comparative static analysis: the effect of different parameter values on conditional variance series.

My problem: no matter how I adjust the parameter values (including elasticity of substitution, and the exogenous variances), the conditional variance series never change, so I was wondering this variable “ConditionalVariance” in conditional_variance_decomposition.m, is it already treated/normalized by dynare?

Thanks for your help in advance!

Yi

2

Could you please post the mod-file. I cannot replicate the described behavior.

3

Hi Dr. jpfeifer,

Sorry for my belated reply.

Please see attached my mod-file and the modified matlab file. The problem is: No matter how I adjust the parameters “tau”(0<tau<1) or “phi”(0<phi<1), the conditional variance series stay the same.

I am aware that the ASYMPTOTIC variances should be independent of “tau” and “phi”, but I believe CONDITIONAL variance series should be sensitive to “tau” and “phi”.

Thank you very much for your help!

Best Regards,
Yi
revision.mod (1.71 KB)
conditional_variance_decomposition.m (3.3 KB)

4

Most other parameters change the conditional variance. Thus, it seems to be an economic feature of your model.

5

Dr. jpfeifer,

Thanks a lot!

Regards, Yi

6

Hello Dr. jpfeifer,

Could you please tell me which parameter values you tried? Thanks in advance. Because as I tried different parameter values, the conditional variance series do not change.

The following is how I calculate the AGGREGATE conditional variance series (AGGREGATE means subject to all the shocks). Please let me know if I made any mistakes. Thanks a lot.

Since I was trying to get the aggregate conditional variance series, after I run “dynare revision”, I use the following matlab code to get the aggregate conditional variance series:

load conditionalvariance A = sum(ConditionalVariance,3); B = A';

Then the rows of matrix B is for different periods, and the columns of matrix B is for different variables.

Thanks again for your kind help!

Regards,
Yi

7

For example, I changed the variance in the shocks-block and beta.

8

Dr. jpfeifer,

Thanks a lot for your reply.

Best,
Yi