Question on stoch_simul


Suppose we are simulating a RBC model with Total Factor Productivity with “stoch_simul”. How does Dynare generate a sequence of those artificial TFPs? Is it based on Tauchen algorithm? If so, how many grid points does it use for the shock?

In perturbation techniques, there is no point in discretizing the state space. Dynare simply draws from the normal distribution with the specified variance.