Hi
Is it possible to make an unanticipated shock in a simulation of a deterministic model in for instance period 2? I.e. that the economy is hit by an unanticipated shock at time t=2 but such that the path for the shock is completely known afterward? I'm not sure whether this break with the "determinism"
THx
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unanticipated shock in a deterministic model
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unanticipated shock in a deterministic model
by h0ps » Wed Jun 04, 2014 8:47 pm
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Re: unanticipated shock in a deterministic model
by jpfeifer » Wed Jun 11, 2014 9:25 pm
It depends what you want. In a rational expectations framework, once a shock has occured, it is perfectly known. Hence, what you describe pretty much describes a standard IRF from stoch_simul. So without further context, I don't understand why you need to conduct this in a determinstic model. Do you need the full non-linearity?
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