bkk example - variance decomposition

[dgrub]

Hi all,

I have just recently started using Dynare and this is my first post to the forum, so please excuse me if this has already been addressed, I couldn't find an answer.

I am working on an international RBC model and I would like to use the bkk.mod file included in the example files of Dynare as a starting point. I am running this example and there is something I don't understand. As far as I can see the countries in this example are completely symmetric (except for the technology shocks which might be different in each country). So I would expect to observe the same results for both countries, or at least very close results. This does not appear to be the case in the variance decomposition table, and I wonder why. I suspect this has to do with how the variance decomposition is calculated, but I would like to know for sure.

Thanks,

Diego

[jpfeifer]

There seems to be an issue with the variance decomposition in conjunction with the HP-filter. If you omitt the HP-filter option it is symmetrical.

[dgrub]

Ok. Thanks for the clarification!

[MichelJuillard]

There is a correlation between the two shocks and variance decomposition is based on Cholesky decomposition of the covariance matrix of the shocks. It is expected for variance decomposition NOT to be symmetrical in this case.

Best

Michel

[dgrub]

Sorry Michel I somehow missed your reply. Thanks for clarifying, I will not worry about this anymore.