Hi

I've tried searching the forums and looking in various books (Durbin & Koopman 2012 and Hamilton 1994) but haven't been able to find what I'm searching for so I'll just ask it here.

How should I interpret the size and sign of the shocks in the historical shock decomposition graph produced by the command shock_decomposition;? I tried looking at Pfeifer's introduction to graphs but it doesn't mention size/sign.

I've attached an example below where a shock decomposition is made for consumption. If we take the monetary policy shock (eta_R) as an example, we see that there are large positive spikes from around period 50-70. Does this mean a positive interest rate shock (i.e. higher interest rates) where the magnitude is indicated by the y-axis? As such, would the interpretation be that the fall of smoothed consumption deviations from steady state (model is log linearised around S.S) can be explained by a positive monetary policy shock. Secondly, can the magnitude of shocks then be compared to the prior/posterior standard deviations of the shocks?

Any clarification as greatly appreciated.

//modin