Simulate change in inflation target

[pb11]

Hello everyone,

I am a beginner on Dynare and I hope this question does not sound too trivial. I am trying to simulate an unanticipated and permanent reduction in the inflation target of the central bank in a closed economy model.

Among the various variables I have pai, which represents the level of inflation and among the parameters paiss which indicates inflation at steady state.

What I would like to do is to simulate the model and see the IRFs of the different variables, in case paiss goes from say 4% to 1%. Unfortunately, I don’t really know how to proceed. In the mod file I received, the value of paiss is first set at a certain value, in the initval section pai=paiss is placed and then the model is shocked. Now I would like to modify this model to simulate the above described scenario.

I thank everyone for the help

[jpfeifer]

Essentially, you can do the same structure as

Asymmetric responses in a perfect foresight model

Did you mean to say, “If you don’t make sure the \bar{ \pi} moves with the change in the inflation rate…”? Because \bar{ \pi} is already the target, yeah? And thus, your reply sounds like, “if you don’t make sure the target moves with a change in the target…” So what I have in my model is something like this. Everything is the same in the initial and endval sections, except target and steady-state inflation rate (inflation_rate). The model is non-linear. var Y C ...; varexo target; paramet…