mixing deterministic and stochastic shocks
Posted: Wed Jan 14, 2009 6:30 pmDear all,
I am trying to simulate a model where I would like to add an expected productivity shock which in turn proves to be unrealistic.
For expected productivity shock I wrote the equations as following
EE_exp=E_exp;
EE_A = (rho_a)*EE_A(-1)+EE_exp(-4)+E_A;
But I could not figure out how I can define another shock which offsets the effect of expectation shock. In other words, I would like to give a shock to the model in the 5th period which equals to the negative of the expectation shock so that productivity does not increase in contrast to expectations.
I would really appreciate if anyone could help me.
cheers...
I am trying to simulate a model where I would like to add an expected productivity shock which in turn proves to be unrealistic.
For expected productivity shock I wrote the equations as following
EE_exp=E_exp;
EE_A = (rho_a)*EE_A(-1)+EE_exp(-4)+E_A;
But I could not figure out how I can define another shock which offsets the effect of expectation shock. In other words, I would like to give a shock to the model in the 5th period which equals to the negative of the expectation shock so that productivity does not increase in contrast to expectations.
I would really appreciate if anyone could help me.
cheers...