Dear Professor,
I have a simple AR type model were I introduce a contemporary and a lagged shock.
This is just one equation model: 0.9*a = 0.2*a(-1) + 0.1*a(+1) + 0.3*e - 0.4*e(-1)
Dynare internally produces two equations where the second equation relates exogenous shocks with lags.
The equations matrix is:
jacobia =
0.4 -0.2 0 0.9 -0.1 -0.3
0 0 1 0 0 -1
I guess the unknowns are [e1, a(-1), . ,a ,a(+1), e2; 0, 0, e1(+1), 0, e2].
Here e1 = e(-1), e2 = e and jacobia is a Jacobian matrix passed to “dyn_first_order_solver.m” function.
Why an additional equation for shocks e1,e2 is introduced? Obviously, e1(+1) = e = e2.
Is this setting equivalent to a shock of 0.3 at period 1 and -0.4 at period 2?
When I run simulations without this additional equation by LBJ method (perfect foresight),
I am getting different results than when assuming this identity equation.
The lagged (A), contemporaneous(B) and lead (C) matrices are:
A =
0.4 -0.2
0 0
B =
0 0.9
1 0
C =
-0.1
0
The corresponding variables are: [e1,a(-1)]; [e2,a], and [e1(+1),a(+1)].
Should matrices B, C read?
B =
-0.3 0.9
1 0
C =
0 -0.1
-1 0
Thank you,
Alexei
var a;
varexo e;
model(linear);
0.9*a = 0.2*a(-1) + 0.1*a(+1) + 0.3*e - 0.4*e(-1);
end;
shocks;
var e;
stderr 1;
end;
stoch_simul(irf=7,graph);