Dear all,

Given estimated DSGE model which assumes policy rate follows the estimated rule,

I would like to consider alternative scenario such that when shock hits the economy, the central bank announces that it will maintain the interest rate at its pre-shock level(which is steady state) for T-periods and return to estimated rule afterwards.

stoch_simul_para_t.m (20.8 KB)

This is the function which consider alternative scenario and do stochastic simulation .

TNT_Big_May20.mod (30.8 KB)

TNT_Big_May20_steadystate.m (7.7 KB)

And this is the given DSGE Model.

At the end of the mod fiile,

I set the moment of the announcement of policy, terminal point and T period(2,4)

opt.simul = 0;

opt.irf_announce = 0;

opt.irfs = 1;

opt.names_change = {‘R_FIX’};

opt.values_theta = [0 1 0];

opt.T0 = 2; % Moment of the announcement.

opt.Tmax = 55; %Number of periods to be considered (with Tmax>=Tstar)

M_orig = M_;

oo_orig = oo_;

options_orig = options_;

for jj = [4 6]

opt.Tstar = jj; % Moment of the terminal point.

tic

[M_t,oo_t] = stoch_simul_para_t(opt, M_orig,options_orig,oo_orig);

toc

oo_.irfs = oo_t.sol_para_t.irfs;

oo_.sol_para_t = oo_t.sol_para_t.irfs;

eval([‘save mats/TNT_Big_May20_R_fix_’ num2str(jj-opt.T0) ‘.mat oo_ M_ options_;’]);

end

But now I can’t figure out why the function stoch_simul_para_t.m is not working.

Any help would be much appreciated.

Thanks