Sep 17, 2014 at 4:58 PM
Edited Sep 17, 2014 at 4:58 PM

Hi Mr : Jaromir
can you please explain me this syntax. it is about running stress scenario simulation with two hypothetical shocks on macroecomics variables (gdpgap exchange rate).
The first hypothetical scenario assumes a temporary shock on the output gap. In particular, from the beginning of the forecast horizon, the GDP gap declines by 1.5 percentage points in every quarter during the first year. Given the assumption that the potential
output growth is 6% (using hp filter), this hypothetical scenario is equivalent to 0% growth for the actual output during the first year. After one year, the actual GDP growth returns to its trend and grows on average by 6%.
In the second scenario, I consider a nominal shock on the GEL/USD exchange rate. For some reason, the exchange rate depreciates by 10% in the first quarter of the forecast horizon. For the rest of the periods, the exchange rate depreciates on average by 1.2%,
as in the baseline case.
here the syntax introduced in matlab :
j=0; % j=1 stochastic basleline scanario, j=2 stress with GDP, j=3 stress with exchange rate
for j = 1:3
for k = 1:Reps
i=0;
for i = n+1:n+h
%% structural shocks simulation
if j == 1
eps =randn(1,10)*chol(sigma); % stochastic baseline scenario
elseif j ==2
if i<=n+4
v = randn(1, 10);
v(8) = 0.8; %GDP shock
eps = v*chol(sigma);
else
eps = randn(1,10)*chol(sigma);
end
else
if i<=n+1
v = randn(1, 10);
v(9) = 2.6; %ex. rate depreciation shock
eps = v*chol(sigma);
else
eps = randn(1,10)*chol(sigma);
end
end
i don't understand why puting (0.8% and 2.6% )



I'm sorry, but this question and piece of code has nothing to do with IRIS, whatsoever. You will have to ask the author of that code. I can't help you...



thank you jaromir.

