Dear all,
I am new to Dynare. I wonder if it’s possible to add shock to the expectation of an exogenous variable.
To be more clear, I am thinking about doing something similar to the news shock experiment (figure 6) in Gertler and Karadi (2011). In the top left figure, the expectation of capital quality remains low for 4 quarters and then went back to normal. I would greatly appreciate it if anyone can share some insights on this.
Many thanks in advance!
You can either go for a news shocks as in DSGE_mod/RBC_news_shock_model at master · JohannesPfeifer/DSGE_mod · GitHub or do a perfect foresight simulation.
Thanks, professor. Your news shock sample code is super helpful!
Could you explain more about doing this using perfect foresight simulation? Is this for simulating an unrealized shock in deterministic circumstances? My understanding is that under perfect foresight, agents know the whole path of exogenous variables. So if we use perfect foresight simulation, agents will do nothing because they know that the news shock will not be unrealized?
It seems I have misunderstood your question. If it’s a pure news shock, then the linked code seems appropriate.
