volatility shocks - 3rd order - replication (or bug)

[mfer]

Did anyone try to replicate the paper by Fernandez-Villaverde (at al): 'Risk Matters: The Real Effects of Volatility Shocks', recently published in AER? (I am refering to the part related to the results of volatility shocks within DSGE model)
I have tried to replicate the working paper version as well as the new (published) version. But without success.

I attach a simplified .*mod file (without x and tb shocks). Any comments, suggestions are welcome!

PS: If you don't use the 3rd order, before trying the code attached, check the topic viewtopic.php?f=1&t=3170

[jpfeifer]

Yes, I have replicated the model and their IRFs.

[mfer]

With Dynare? Do you maybe see what is wrong with the code above and would you be willing to share your knowledge?

[jpfeifer]

At that time, I could not use Dynare directly due to the need for pruning which was not implemented for order>2. I rather used the Dynare code and modified it to my needs. Note also that the IRFs start at the mean of the ergodic distribution in the absence of shocks (fixpoint without shocks) and not at the deterministic steady state.

[jpfeifer]

See my post at http://www.dynare.org/phpBB3/viewtopic.php?f=1&t=5471

[farukakbal]

Hi I am new at Dynare. How can i model equations for shocks of 3rd order, i.e., there should be volatilty on the shock magnitude.
Lets assume eps_m is my shock variable i believe i need to write something like
eps_m = k. epms_m(-1) + eps1_m;
eps1_m = l*eps1_m(-1) + eps2_m;
and there will be a variance of eps2_m.
But i couldnt get the equation structure to write, with this approach eps_m and eps1_m are just variables with steady state. I need them to have same std. dev. as well.

[jpfeifer]

See https://github.com/DynareTeam/dynare/blob/master/tests/decision_rules/third_order/FV2011.mod for an example