Dynare forums

Hello,

I am simulating a DSGE model found in this paper http://mpra.ub.uni-muenchen.de/14977/1/mw33.pdf but am including second moment shocks to TFP. When I do a second third order approximation my IRFs are not smooth. I know this issue has come up before, for instance in this thread: viewtopic.php?f=1&t=2829. However, when I implemented Dr. Juillard's code, the constructed impulse responses have the variables not reverting to steady state. Is there a way to fix this? I know for higher order approximations Dynare draws a series of shocks for 140 periods. Is there a way to increase the number of periods and perhaps smooth out the IRFs? I've attached the code with the IRFs computed both ways. Thanks for the help.

The cause of your problem comes from the fact that you did not call "steady", so oo_.steady_state does not contain the steady state.

Either call "steady" before "stoch_simul", or use "oo_.dr.ys" instead of "oo_.steady_state" in your calculations at the end of the MOD file. When doing the former, I get an almost flat (up to 1e-5) IRF for consumption, which is reasonable from a computational point of view (I don't know if this is from an economic point of view, I did not study your model).

Best,

Whoops, silly mistake. Thanks for the response!