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I build a small open economy model with two sectors. I plan to look at the dynamic path when one structure parameter changes. So the model has two steady states. However, the irf from the simulation show that most variables go far away from the new steady state during the path, only in the last period, it will just jump back the new steady state. It would be greatly appreciated if someone can help me out.

The code is attached.

Hi, Kang:

Try to define the parameter as a variable and then look at the responses.

Thanks, bigbenmike,

I thought the structure change as a permanent shock, so in my code, I define the parameter as exogenous shock. I give the two steady states in inival and endval blocks. is this the way to solve deterministic model with permanent shock?

best,

kang

Hi,
you should create a variable that is the shock (for instance eps that is var_exo) and in your model, you write (param+eps) everywhere your parameter (param that is defined as a param value) appears.
Hope it helps
Best

i feel the same just like your, i also think the structure change as a permanent shock ,but the answer from bigbenmike still puzzle me , do you know what eactly his means? thanks very much...new learner.

kang wrote:Thanks, bigbenmike,

I thought the structure change as a permanent shock, so in my code, I define the parameter as exogenous shock. I give the two steady states in inival and endval blocks. is this the way to solve deterministic model with permanent shock?

best,

kang

Hi, i am not quite sure about your explanation ,can you tell me whether the structure change is the same with permanent shock?
or how can i put a permanent shock in the model? thanks a lot...

cel wrote:Hi,
you should create a variable that is the shock (for instance eps that is var_exo) and in your model, you write (param+eps) everywhere your parameter (param that is defined as a param value) appears.
Hope it helps
Best