Stochastic vs. deterministic model

I actually haven’t used varexo_det myself, so maybe I should let an administrator handle this.

But my understanding is that these deterministic changes specified in varexo_det need to be temporary, so you can’t do permanent deterministic changes. This would affect the steady-state which is not allowed since the stochastic model is approximated around a constant steady-state. This could be the source of the problem.

If you’re analyzing a one-time unexpected but permanent change, then you should build the model as a deterministic model, and make the model calculate the transition path from an initial to a new steady-state.

otb