Variance decomposition in a model using third-order perturbation method and the pruning algorithm

General DSGE Modeling
1

Hello, everybody. I have a question.

I am working on my model where I try to study the effects of uncertainty shocks. I solve the model using a third-order perturbation method, as suggested by Fernández-Villaverde et al. (2011) and the pruning algorithm.

How can I do variance decomposition?

It seems that the command
“stoch_simul(order=3,irf=20,conditional_variance_decomposition=[8 12],pruning) q o pi y gap;” does not work.

The mod file is attached.
I would be appreciated if someone could help me.
Thanks in advance !
my_model.mod (9.0 KB)

2

The Fernández-Villaverde et al. (2011) paper conducts an unconditional variance decomposition based on simulations. For that, you need to set the periods-option.