State dependent impulse response functions

[Daniel Bendel]

Hey all,

once again a general question:
can dynare generate state dependent impulse response functions? To make this clearer:

Suppose one wants to investigate the effect of a government spending shock: my intuition tells me that the size of the fiscal multiplier should vary, if the economy is in a state where output is below or higher than its steady state value. How can I investigate this with dynare?

Has anyone experience with this topic?

Thank you all!
Daniel

[Niklas]

Hello Daniel,

if the model is linear, the fiscal multiplier should be the same, no matter whether output is below or above the steady state. (In a linear model, impulse responses are state independent.)

Best,
Niklas

[Daniel Bendel]

But what if I do second order approximation?

[jpfeifer]

Then Dynare generates a generalized IRF that is state dependent. However, the GIRF is computed at the ergodic mean. We are working on a version that allows specifying the point at which the IRFs is generated, but it will still take some time.

[np2333]

Can i find some documentation on how GIRF is implemented in dynare and what options are available? In particular, is it possible to generate asymmetric irfs in dynare (i.e different irfs for negative and positive values for the same shock) under a second order approximation?

[jpfeifer]

Please see the RBC_state_dependent_GIRF.mod on my homepage.

[sidus87]

Dear Johannes,

I have a question concerning your code to compute the state-dependent GIRFs. In particular, concerning the GIRF conditional on being in the state with low capital, why do you use the deterministic steady state as a starting point instead of the ergodic mean? Is there any economic meaning behind this?

Thanks in advance

[jpfeifer]

There is no meaning behind this. The exercise simply was to compute the GIRF at capital 10% below the steady state. We could also have used 10% below the ergodic mean. This would simply be answering a different question.