Hi, Dynare team
Now I am trying to modify a typical DSGE model (Iacoviello 2015 RED)
and I want to add some shocks i.e.) house construct shock.
When I use quaradic detrended house supply data and match the data with the shock, it is highly volatile.(-0.2 to 0.2)
However other shocks’ prior and estimates are quite modest and above all, other macro variables’ data (also quadratic detrended and I used other data set) is less volatile relative to my new shocks.
As a result shock decompostion results are quite strange.
If I change the other shocks prior as volatile as house shock, the prior-posterior graphs are fine, but shock decompostion graphs are messy.
Is there any advice to deal with too big shocks? I think that I should not scale the house supply shock like multiply 0.1 to make it small…