# Regime Switching / Change in Structural Parameter in time

Hi community,

in one model i am trying to put into dynare, i would like to simulate that a structural exogeneous Parameter is changing after 10 periods (=from period 11 on)

In other words, i would like to set the exogeneous interest rate during the first 10 periods at a Level of 1.01 (=1%) and from period 11 on until period 100 to Level 1.04 (=4%)

Could anyone support me with some hints on how to do that ?

Many thanks in Advance and have a nice week

Simon

Hi, you need to provide more context. Is the change permanent or temporary. Do people know/take into account that the parameter can switch or is it a once and for all change? Is the model stochastic or perfect forsight?

Thank you for your answer jpfeifer,

According to your Questions:

1. the “Change” Looks as follows: from period 0 till period 10, the structural exogeneous Parameter (here: interest rate) is supposed to be “1.01”, and from period 11 till 100 (end of the Simulation) the same structural exogeneous Parameter is supposed to take the value 1.04. In other words, the structural exogeneous Parameter is temporary low (for the first 10 periods)

2. yes, People know that the Parameter can switch

3. the model is perfect foresight

Many many thanks in advance and kind regards

Simon

Dear Community,

did someone have the Chance to think About my Question?

Many thanks in Advance & Kind regards

Simon

There is some tension in your answer. If you do perfect foresight, then agents will know exactly when the parameter will switch. This switch will be perfectly anticipated. Is that what you want?
In any case, it sounds like a straightforward transition exercise. Use `initval` and `endval` to set the initial and terminal steady state and a `shocks`-block to define the parameter change.

Many thanks for your answer jpfeifer,

At the Moment, i am on a Seminar that will take two more weeks.

after that, I will incorporate your Suggestion.

Once again many thanks

Simon