Exogenous Shocks - Simulations
Posted: Tue Jul 12, 2016 8:06 am
Hi, hopefully a quick one for you.
I'm trying to see how a policy rule responds to a series of shocks to the supply potential of the economy.
Problem is that my model features lots of forward-looking behaviour so the agents in the economy see the shocks coming.
Is there a way I can run a simulation in which shocks cannot be anticipated?
Many thanks and sorry if I've missed some earlier discussion of this - I did have a look for it.
Jamie
I've attached the workfile.
The shock I've been running enters the model as a variable called SShock in the trend GDP equation.
I've got a series of shocks starting from 2020Q1. But I can see that the exchange rate (Q) is responding when I run scenario 1 from the beginning of the solution period. In other words, everyone is seeing these shocks coming, rather than experiencing them as exogenous shocks.
I'm trying to see how a policy rule responds to a series of shocks to the supply potential of the economy.
Problem is that my model features lots of forward-looking behaviour so the agents in the economy see the shocks coming.
Is there a way I can run a simulation in which shocks cannot be anticipated?
Many thanks and sorry if I've missed some earlier discussion of this - I did have a look for it.
Jamie
I've attached the workfile.
The shock I've been running enters the model as a variable called SShock in the trend GDP equation.
I've got a series of shocks starting from 2020Q1. But I can see that the exchange rate (Q) is responding when I run scenario 1 from the beginning of the solution period. In other words, everyone is seeing these shocks coming, rather than experiencing them as exogenous shocks.