Dear Prof Pfeifer
I am running this implementation of an NK model subject to the ZLB:
I noticed that if I run shock_decomposition after either of the calib_smoother commands, the resulting shock decompositions show large contributions from “initial values” during ZLB periods. These appear necessary to fit the data during such periods.
My question is: what do these “initial values” represent? They do not decay over time starting from the beginning of the simulation, as you would expect / typically find when ignoring OBCs and estimating a purely linear model.
More generally, is shock_decomposition the correct command to use after the Occbin smoother has been run, or is there an Occbin-specific version of the shock decomposition command?
Thank you