Node:Shocks on exogenous variables, Next:Computations and simulations, Previous:Initial and terminal conditions, Up:Commands
In a deterministic context, when one wants to study the transition of one equilibrium position to another, it is equivalent to analyze the consequences of a permanent shock and this in done in DYNARE through the proper use of initval and endval.
Another typical experiment is to study the effects of a temporary shock after which the system goes back to the original equilibrium (if the model is stable ...). A temporary shock is a temporary change of value of one or several exogenous variables in the model. Temporary shocks are specified with the command shocks.
In a stochastic framework, the exogenous variables take random values in each period. In DYNARE, these random values follow a normal distribution with zero mean, but it belongs to the user to specify the variability of these shocks. The non-zero elements of the matrix of variance-covariance of the shocks can be entered with the shocks command. Or, the entire matrix can be direclty entered with Sigma_e. Note that, starting with version 2.5.2, the direct specification of the internal matrix Sigma_e_, prone to errors, is discouraged.
If the variance of an exogenous variable is set to zero, this variable will appear in the report on policy and transition functions, but isn't used in the computation of moments and of Impulse Response Functions. Setting a variance to zero is an easy way of removing an exogenous shock.