moments of second-order approximation
Posted: Thu Jun 11, 2015 12:23 pmWhen I run a first-order approx. with Dynare using stoch_simul(order=1,nograph) I get the theoretical moments printed out by Dynare and they are stored in oo_.mean.
When I run a second-order approx. with Dynare using stoch_simul(order=2,nograph) I get the "Approximated theoretical moments" printed out and they are then stored in oo_.mean (I think). I guess they are "approximated", because uncertainty equivalence does not hold any more and the deviation from the uncertainty equivalence can only be approximated?
Now, in my model, I have the problem that I get the message that "irfs cannot be displayed" because they are explosive and that I should use pruning or do some other things to my model. I can get rid of this problem by just reducing the size of the shocks. But doesn't that have an effect on the the approximated theoretical moments? If I make the shocks very very small the deviations from certainty equivalence should be very very small (or am I understanding something wrong?). Another "fix" which makes Dynare run without complaining about explosiveness, is that I set irf=0, i.e., stoch_simul(order=2,nograph,irf=0). But then, something happens to the approximated theoretical moments. In particular, I have a two-symmetric-countries model and then suddenly I get completely different approximated theoretical moments for the two countries for all variables. So something is messed up/changes when I use the irf-option in a second-order approx. I cannot find and answer to that in the manual. Are the policy functions still correct?
When I run a second-order approx. with Dynare using stoch_simul(order=2,nograph) I get the "Approximated theoretical moments" printed out and they are then stored in oo_.mean (I think). I guess they are "approximated", because uncertainty equivalence does not hold any more and the deviation from the uncertainty equivalence can only be approximated?
Now, in my model, I have the problem that I get the message that "irfs cannot be displayed" because they are explosive and that I should use pruning or do some other things to my model. I can get rid of this problem by just reducing the size of the shocks. But doesn't that have an effect on the the approximated theoretical moments? If I make the shocks very very small the deviations from certainty equivalence should be very very small (or am I understanding something wrong?). Another "fix" which makes Dynare run without complaining about explosiveness, is that I set irf=0, i.e., stoch_simul(order=2,nograph,irf=0). But then, something happens to the approximated theoretical moments. In particular, I have a two-symmetric-countries model and then suddenly I get completely different approximated theoretical moments for the two countries for all variables. So something is messed up/changes when I use the irf-option in a second-order approx. I cannot find and answer to that in the manual. Are the policy functions still correct?