Simulate temporary and permanent shock simultaneously

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Simulate temporary and permanent shock simultaneously

Postby zoinkata17 » Fri Feb 14, 2014 12:54 pm

Hello,
I am working with a deterministic model. I would like to be able to simulate a temporary and a permanent shock simultaneously. The idea is that as the economy transitions from one steady state to the other, this transition might be smoothed with a subsidy. If I do a permanent subsidy the model's steady state will be affected by it. However, I want the model to end up at the same steady state as without the subsidy but only transition to be affected by the subsidy. Is this possible to do with Dynare?
Thank you in advance for answering.
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Re: Simulate temporary and permanent shock simultaneously

Postby jpfeifer » Fri Feb 14, 2014 1:12 pm

In deterministic simulations this should be straightforward. Use the endval-block to define the permanent shock and a shocks block to set the temporary shock. Alternatively, specify both shocks in the shocks block and make the permanent shock active in all periods.
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Johannes Pfeifer
University of Cologne
https://sites.google.com/site/pfeiferecon/
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