Hi,

I was trying to replicate some results from Leduc&Liu (2016) “Uncertainty shocks are aggregate demand shocks”.

The attached “ll_dynare.mod” is the modeling. My test showed that it successfully gave the results for regular stochastic simulation. HOWEVER, in “ll_main.m”, I had difficulty in replicating LL (2016) IRFs for uncertainty shock, in the section %%Uncertainty Shock and %%IRFs.

LL’s main idea is

(1) Use the remaining 96 periods to compute the ergodic mean of each variable.

(2) Starting from the ergodic means, conduct two different simulations

of 20 periods each, one with an uncertainty shock (i.e., a one-standard-deviation increase in uncertainty in the first period) and the other with no shocks

(3) The impulse responses are then calculated as the percentage

differences between these two simulations.

I believe that I followed that correctly. But when I checked the results matrices for the above simulation, called temp2 and temp3 in “ll_main.m”, I found that they’re the same and thus no deviation.

I would appreciate it if anyone can give me some advice. Best.ll_dynare.mod (4.6 KB)

ll_main.m (1.5 KB)