I try to add tariff uncertainty to nonlinear small open economy model.
Although the code can run, but the result is obviously wrong.
(The model based on Gali Chapter 8 third order)
(1)oo.stochastic_steady_state does not converge.
(2)the impluse response graph of Y, C is up to 10^5. the variable value of “variables_irfss” is big.
I don’t know why the results is so big.
I see you had replicated Basu/Bundick (2017): Uncertainty shocks in a model of effective demand", all level shock has a 1 standard deviation shock as following，other economists also set the standara deviation of the level shock to 1.
I think the level shocks should: var eps_sigma_a; stderr 0.002; var eps_a; stderr 0.01; I don’t understand why stderr set to 1.
Yes, but their process is
[name='Preference shock process level equation']
[name='Preference shock volatility process']
so that the shock term has standard deviation