Dynare forums

Hi all,

I'm working to obtain the IRFs of a nonlinear model.

The model is a stardard NK one with the production function takes the following form:

Code: Select all

A*K(-1)^alpha*H^(1-alpha) = Y;

Technology follows an AR(1) progress:

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A - A_ss = rho_A*(A(-1)-A_ss) + eA;

I put down the shock as follows:

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shocks;
var eA; stderr 1;
end;

Based on my understanding, this represents a shock of 1% on A from its steady state. Is my understanding correct?


The IRFs generated by Dynare shows that Y jumps to around 3.5 immediate following the shock. Does it mean that:
(i) Y is 3.5% from its steady state value; or
(ii) Y is 3.5 units from it's steady state (because it's a nonlinear model); or
(iii) the increase in Y is 3.5 times the size of the technological shocks?

Thanks for your help.