Dynare forums

Hi

I have a model with temporary and permanent productivity shocks. I normalized the standard deviations of shocks as 1%. I have been told this is fine if I have each one seperately but if I have both shocks in the same model, then I need to know which one is more important and has a higher sigma. How I can do that? Any suggestions are appreciated!

Best,

There is no general advice here. Maybe you could do indirect inference, i.e. try to match some moments