Jumping IRFs to second-order shock to TFP

[nastforest]

Hi,

I am simulating a financial accelerator model of Bernanke, Gertler and Gilchrist (1999) (a code of Cesa-Bianchi: https://sites.google.com/site/ambropo/dynarecodes) and introduce a shock to variance of aggregate productivity.

The problem is - my IRFs are 'jumping' (not smooth) in contrast to IRFs presented in the literature on macro uncertainty.

Could you please help me - what am I doing wrong? Am attaching a code here.

Thank you!

[alphaxuan]

I am encountering similar problems. Would appreciate some help!

[jpfeifer]

See the discussion at the bottom of http://www.dynare.org/phpBB3/viewtopic.php?f=1&t=5073 as well as the Appendix B7 at https://sites.google.com/site/bornecon/research/Born_Pfeifer_Policyrisk_Appendix.pdf?attredirects=0

Short summary: either you need really a lot of replications or you use IRFs relative to the stochastic steady state/ergodic mean in the absence of shocks as described in our Appendix (which is exactly what Risk Matters did). Also note the terminological confusion. Risk matter actually computes IRFs not as deviations from the ergodic mean, but from a different concept best termed "ergodic mean in the absence of shocks " or "stochastic steady state". They are deterministic and you don't need replications to make them smooth.

[jpfeifer]

Regarding IRF construction in the "Risk Matters" paper, see http://www.dynare.org/wp-repo/dynarewp039.pdf and http://www.dynare.org/phpBB3/viewtopic.php?f=1&t=5471