# Variance Decomposition

**URL:** <https://forum.dynare.org/t/variance-decomposition/4754>\
**Category:** Dynare help (legacy posts)\
**Created:** [9 June 2015 07:38 UTC](https://forum.dynare.org/t/variance-decomposition/4754 "2015-06-09T07:38:42Z")\
**Posts on this page:** 5\
**Page:** 1

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**Author:** ![qazi.haque](https://forum.dynare.org/letter_avatar_proxy/v4/letter/q/c67d28/32.png) [@qazi.haque](https://forum.dynare.org/u/qazi.haque)\
**Post date:** [9 June 2015 07:38 UTC](https://forum.dynare.org/t/variance-decomposition/4754/1 "2015-06-09T07:38:42Z")

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Hi there,

Just wanted to know, is the unconditional variance decomposition (reported in DYNARE) different from infinite-horizon forecast error variance decomposition?

Thanks,  
Qazi

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**Author:** ![jpfeifer](https://forum.dynare.org/user_avatar/forum.dynare.org/jpfeifer/32/5044_2.png) [@jpfeifer](https://forum.dynare.org/u/jpfeifer)\
**Post date:** [9 June 2015 08:35 UTC](https://forum.dynare.org/t/variance-decomposition/4754/2 "2015-06-09T08:35:54Z")

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Those are the same concepts.

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**Author:** ![qazi.haque](https://forum.dynare.org/letter_avatar_proxy/v4/letter/q/c67d28/32.png) [@qazi.haque](https://forum.dynare.org/u/qazi.haque)\
**Post date:** [9 June 2015 08:41 UTC](https://forum.dynare.org/t/variance-decomposition/4754/3 "2015-06-09T08:41:35Z")

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…meaning shocks happen every period between now and infinity and variance decomposition is simply the fraction of the variance of each variable that each shock would explain in an inifinitely long simulation of the specified model.

Is that correct?

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**Author:** ![jpfeifer](https://forum.dynare.org/user_avatar/forum.dynare.org/jpfeifer/32/5044_2.png) [@jpfeifer](https://forum.dynare.org/u/jpfeifer)\
**Post date:** [9 June 2015 14:29 UTC](https://forum.dynare.org/t/variance-decomposition/4754/4 "2015-06-09T14:29:30Z")

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Yes, this is one way to interpret it.

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**Author:** ![qazi.haque](https://forum.dynare.org/letter_avatar_proxy/v4/letter/q/c67d28/32.png) [@qazi.haque](https://forum.dynare.org/u/qazi.haque)\
**Post date:** [10 June 2015 00:59 UTC](https://forum.dynare.org/t/variance-decomposition/4754/5 "2015-06-10T00:59:09Z")

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Thanks!