Hi all,
I’m new to dynare and have some questions regarding how it works. So I have a very simple stochastic model below (where each endogenous variable is in logs, i.e. model will be log-linearized):
var c k lab z;
varexo e;
parameters bet the del alp tau rho s;
bet = .987;
the = .357;
del = .012;
alp = .4;
tau = 2;
rho = .99;
s = -.1;
model;
(((exp©^the) * (1-exp(lab))^(1-the))^(1-tau)) / exp© = bet * ((((exp(c(+1))^the) * (1-exp(lab(+1)))^(1-the))^(1-tau)) / exp(c(+1))) *
(( 1 + alp * exp(z(-1)) * exp(k(-1))^(alp-1))* (exp(lab)^(-alp)) - del);
exp© = (the / (1-the)) * (1-alp) * exp(z(-1)) * (exp(k(-1))^alp) * (exp(lab)^(-alp)) * (1-exp(lab));
exp(k) = exp(z(-1)) * exp(k(-1))^alp * exp(lab)^(1-alp) - exp© + (1-del)*exp(k(-1));
z = rhoz(-1) + se;
end;
//Steady state values that work: k = 7.29, c=-1.19042, lab=-0.0496051
initval;
k = 7.29;
c = -1.19;
lab = -.0496051;
z = 0;
e = 0;
end;
shocks;
var e;
stderr 1;
end;
steady(solve_algo = 2);
stoch_simul(periods=1000,irf=400);
I don’t understand what periods are (periods = 1000) and how shocks are applied to this model. What is calculated in each period? How is each endogenous variable calculated in each period? What does a 1 standard deviation shock mean?
I appreciate your help!