# Some questions on policy setting in the model

Dear Professor Pfeifer,

1. I set a exogenous policy variable z_t in the model and its steady state is 1. I could easily get irf picture of some shock (e.g. technology shock) to the model when I just set z_t=1 (which means no policy improvement). But, If I want to get irf picture of some shock under the same time z_t is decreasing from 1 to 0, how could I realize this?

2. I read in some paper that the policy variable z_t is set as:
\log \left( \frac{{{z}_{t}}}{{\bar{z}}} \right)=\rho \log \left( \frac{{{z}_{t-1}}}{{\bar{z}}} \right)-\left( 1-\rho \right)\phi \log \left( \frac{{{y}_{t}}}{{\bar{y}}} \right) in which y represents the output. The value of parameter \rho means the persistence of the policy. How is this persistence related to the real time? For example, if \rho=0.5, how many quarters is the persistence of the policy?

3. If I want to set \log \left( \frac{{{z}_{t}}}{{\bar{z}}} \right)=\rho \log \left( \frac{{{z}_{t-1}}}{{\bar{z}}} \right)-\left( 1-\rho \right)\phi \log \left( \frac{{{y}_{t}}}{{\bar{y}}} \right) when output is positively deviate its steady state( \frac{{{y}_{t}}}{{\bar{y}}}>1) and z_t=1 when output is negatively deviate its steady state( \frac{{{y}_{t}}}{{\bar{y}}}<1), how should I realize it?

Thanks again for your time on this.

1. Are you doing stochastic simulations? Then you can use the simult_-function to run joint shocks.
2. Full geometric decay always takes forever. But people often use the half-life. See e.g. Persistency of IRFs: Definition - #15 by jpfeifer
3. That seems like an occasionally binding constraint you could implement with Occbin.

Dear Professor Pfeifer,

1. Yes, I’m doing the stochastic simulation. How should I use “simult_-function to run joint shocks” ? Would you please give any example?

2. How should I realize this kind of occasionally binding constraint in Dynare? Is there any examples?

As always, thank you very much for your time on this.