Relative_irf option for stoch_simul command

Dynare help (legacy posts)
1

Hello,

I just want to clarify what exactly the relative_irf option for the stoch_simul command is computing? Does the response numbers shown in the Figures mean that the variable of interest responds by n% on impact after a 1% exogenous shock or a 1 unit exogenous shock? I would appreciate it if anyone can let me know exactly how the relative_irf is computed. Sometimes I see very large numbers of the orders of 100s. Thanks in advance!

2

Relative IRFs are computed relative to the size of the innovation. I agree that it isn’t the most useful and relative to the steady state of the variable would be better. We will change it in a future release

Best

Michel