Hi there,

Apologies for a very basic question, but I’m new to using Dynare, and I am struggling to find resources online to help with my query. My basic issue is that I don’t know how to interpret IRFs. In the following model (taken from Torres Chacon, 2014), I get various graphs, showing the impact on my endogenous variables of an exogenously given shock to e.

More specifically, I’m confused about two things. Firstly, I am unclear about what the red lines in all of the graphs represent. Secondly, I’m unsure how to interpret the y-axis of my graph. I would really appreciate any help that can be offered on this!

model12.mod (1.2 KB)