by sidus87 » Tue Mar 08, 2016 4:02 pm
Dear all,
I have a question concerning the calculation of IRFs from the Stochastic Steady State (SSS) as done in Basu and Bundick (2015). Brent Bundick has uploaded his code on his website and what they do is basically:
"simulating" (with simult_) the model with zero shocks (starting at the deterministics steady state) for a burn in period of say 2000, then at time 2001 there's the uncertainty shock hitting (simulation continues up until period 2020, so to get an IRF of 20 periods).
What I was doing before instead, was to run once simult_ with zero shocks for to back out the SSS, then run a second simulation with simult_ starting at the SSS to obtain the IRF.
I thought the IRFs would deliver the same result, but surprisingly (to me) they don't. Can anyone explain me why this is the case? Moreover, what's the correct way of doing it? Thanks in advance
 Attachments

 IRF_Basu.pdf
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 IRF_mine.pdf
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