Dear all,

I have a linearized Smets&Wouters’07 model estimated on a few **undemeaned** observed variables, which are coded as (in the case of output):

where *dy* is not demeaned first difference of log GDP times 100, and *ctrend* is its long-run growth.

When estimating the model, the smoothed *dy* is shifted down by a constant ‘ctrend’, thus it does not coincide with the observed *dy*.

My question:

- is that lack of long-run growth in the smoothed variables an expected result?

If ‘yes’, my concern is that the smoothed *y*, in contrast to the observed one, is not trending anymore and thus

2) I’m wondering whether the ‘output gap = y - y_flexible’ is correctly estimated/smoothed (as a difference between two trending variables).

3) Also, *shock_decomposition* decomposes the variables without constants, so how to decompose the missing constant growth?