RBC model: deterministic vs stochastic simulations

In this video I focus on simulations and discuss the difference between the deterministic and stochastic model framework of Dynare.

This video is part of a series of videos on the baseline Real Business Cycle model and its implementation in Dynare. In this video I focus on simulations and discuss the difference between the deterministic and stochastic model framework of Dynare. I provide intuition how Dynare “solves” or “simulates” these different model frameworks and guidance on when to run either deterministic or stochastic simulations. Then I show how to simulate various scenarios in the baseline RBC model.

In the deterministic case (i.e. under perfect foresight), this videos covers

In the stochastic case, this videos covers

Video

Timestamps

Theory

Deterministic Simulation in Dynare

Stochastic Simulation in Dynare

Outro & References

Slides

Presentation

Codes

rbc_steady_state_helper.m

f e u n n d c t o l i p o t = n i o f l n s s o = l = v r e b o ( c p @ _ t ( s i l t m ) e s a e w d t * y ( C _ ' _ s D L t i ^ a s ( t p - e l E _ a T h y A e ' C l , ) p ' e o - r f ( f P L ' S 0 , I , ' / T G w o A , l M C X M _ ' A L , * , 1 ( E e 1 T - - A 1 l C 0 ) , , ^ E ' ( T T - A o E L l T , F A P u L S n ) I ' * , , l G 1 ^ A e E M - T M 1 A A 0 C ) ) ; , L 0 , o p t i o n s ) ;

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@ v ; m ; v ; p ; % A B D G P R @ E E @ m % @ @ @ % # # [ u [ w [ k [ y [ y [ m [ w [ r [ l e % % % s a m r K w I Y C @ @ @ c y i k e # a o a a L E E A S H # T T # o m # # # m f f n c n n n n n c n n n o n t c _ V _ _ # # # v n d r y c k l a r w i m d u u u f f r e r B D G P @ E E @ A R P P T L M I O i A A e d a i # # # e # # # e a k l a a = a = a = a = a a = a = a g d S e = = L = _ L L i l e L l e d e v c e c c l k l e p a E E A S # T T # L H a H A T M A f C L n e r f u u u l u u u n r m = m m m m m = m m m ( ; t a = L f l 0 n = = = = ; f l p x s m T L M I i A A e P O r A A A d l g c c l s c c l d g = = e e - e ( e c e a e e m e m e a e d e 1 = m = = = s = d i _ o a e A T M f C L n H A a L i ; i L p e p i i = B = u = 1 = = * = 1 = c = c = ) a y x 1 / c = L e = i C Y I K n l t A A d A m = = = = = = O = = f n O = = f n A ( ' E ' l ' - ' + ' k ' ; ' * ' * ' d _ p ; B ( * a Y O G r f _ _ V _ e o e L i e G a G = = a L 1 i T l c D m p ( m l f c f t = y s ( E m ( D * _ G A 1 b L L _ L $ $ $ $ $ $ $ $ $ c $ $ $ $ $ $ r $ $ $ $ O $ $ f $ $ t 0 0 0 1 1 0 U 2 1 l U = - = - l P - n A a u a E a i r - a a l a k o t e T c 1 E ( L U M / c * * L * L { { { { { { { { { a { { { { { { s { { { { G { { { { e . . . ; . . T ; ; T G P G P H A t * b c p L r v o 1 r b ; p ; t R S a p A * - L K T M 3 _ l l * l O Y C K L A R W I M l U E U f f \ \ \ \ \ U \ \ \ \ r 3 9 0 6 9 I u I A G S A G S p A L e u o ; i T k ; d ) g o i a H t t s A A T _ - I A ; s ; ; l ; G } } } } } } } } C _ _ _ _ _ _ v b d g p T e e a r 5 9 2 ; ; L t L M A I M A I r * P r c r t A e u ^ i r t l O a e a + L L A L L / t ; U $ $ $ $ $ $ $ $ } v t t t t t a e e a s I t t l h c ; ; 5 I i I M M * M M * o y H t p a ) t c A n a A t _ / P P * ) I I P e T $ a ^ ^ ^ ^ r t l m i L a a p o a ; T l T A M ( A M ( d / A e * s l * t L a d l f * e m ( D H H K ^ V T S a I r C U L K L e a t m } I ^ ^ h ^ l Y i Y * A 1 * A 1 u k ) m ( u k c i P l e a l o 1 E A A _ A _ Y I d L i } _ } } } p } a a $ T C L a A i t c * - c * - c ( * p 1 p a ( l o H m d c o C d - L * ) L L L = * y I a $ { $ $ $ s $ } } Y } } } } b = y = ^ c l ^ c l t - y o - p c - e n A c a e t g o e R T a ; P ; = C _ T b t i $ $ $ $ $ $ r = = ( ( ) ( ( ) s 1 / r D l c 1 a * o n m o ( m l H A a H 1 _ s Y l + l ! a o - + ^ - + ^ ) l a E y u ) r f l s d a r a p ; O r * A L t e 1 o ( ( ( ( = ( ( ( ( t 0 f 1 1 1 ( E 1 ( o ; ; l L ' m i u ^ t ' n ( u A - ) K ; ^ a = } n l l l l l l l l i ) ) - T ) - f T ] u + n n ( s ] d p - t ) 1 ^ _ ( t ( ( ( ( ( ( ( ( ( ^ ^ o o o o 1 o o o o o c ; ^ 1 A ^ E o A l g c 1 ' ' r 1 a ) ; ( L - e 0 l l l l l l l l l C A n n n n n n n n n o ( ) C ( T p p + a i ' t - ] ] o ) t ; 1 1 _ o o o o o o o o o } } g g g g g g g g n - ; ) - A r t r t v ] i A d ) i / A ) h n n n n n n n n n $ $ _ _ _ _ _ _ _ _ s 1 ; E L o i ( i ; o L u o ( L * e g g g g g g g g g n n n n n n n n u ) T ) d m + o n P c + n 1 P w l _ _ _ _ _ _ _ _ _ a a a a a a a a m ; A ; u a 1 n ' H t - H / p n n n n n n n n n m m m m m m m m p C c l ) ' ] A i e % % % A A ( e a a a a a a a a a ( e e e e e e e e t ) t i ) ] ) v p L ; 1 r m m m m m m m m m l = = = = = = = = i ; i t ; ; i s P + ( e e e e e e e e e o ' ' ' ' ' ' ' ' o o y t a H G L = = = = = = = = = n D D C L R I O D n n y ; A A 0 ' ' ' ' ' ' ' ' ' g i e o a i n u i ( ' ) M , o c c l p i w i m _ s p n b s v t s a E ] ) M u o a a r n a n a n c r s o k e p c n u ; A w t n p b o t g v r a o e u r r u o d l / , p s i o d e e e g m u c m A s t u e P C u u t r u r ' s i e n i p D v e n l r S _ t m a ' c e ) t n = t a t i e E t a ) I L ' p l ) t s m a ' t i s r F l b ' * , ) t ' i t e l P F i o u s r a F o ] C E i ) v n r a o n t i i s a r _ T o i R t C o c n i o s t c L A n t a ' o d t U l n c i t ^ C ' y t ) s u o R t i ' h c o ( , ) ' e t c r a i t ) i r - E ) ' s t ' t l y E t ' 1 T ) ' i ) e i l y ) ) A ) v ' t W a * L i ) y e s o w , t i t f ) P y W g i ; S e h c C I S i t i a , h g ' t p G o h ) y i A c t ' t M k ' ) a M ' ) l A ) ' ) ) ;

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@ v ; m ; v ; p ; % A B D G P R @ E E @ R m % @ @ @ % # # [ u [ w [ k [ y [ y [ m [ w [ r [ l l e % % % s z a m r K w I Y C @ @ @ c y i k e # a o a a L E E A S H # T T # H o m # # # m f f n c n n n n n c n n n o o n t = c _ V _ _ # # # v n d r y c k l a r w i m z d u u u f f r e e r B D G P @ E E @ A R R P P T L M I O i A A e O d a i # # # e # # # e a k l a a = a = a = a = a a = a = a g g d S e 1 = = L = _ L L i l e L l e d e v c e c c l k l e p p a E E A S # T T # L H H a H A T M A f C L n Z e r f u u u l u u u n r m = m m m m m = m m m ( ( ; t a ; = L f l 0 n = = = = ; f l p x s s m T L M I i A A e P O O r A A A d = l g c c l s c c l d g = = e e - e ( e c e a e e m e m e a z e d e 1 = m = = = s = d i _ o a z e A T M f C L n H A Z a L i 0 ; i L p e p i i = B = u = 1 = = * = 1 = c = c = ) ) a y x 1 / c = L e = i C Y I K n l t A A d A m = = = = = = O = = f . n O = = f n A ( ' E ' l ' - ' + ' k ' ; ' * ' * ' d _ p ; B ( * a Y O G r f _ _ V _ e o e L i e G 5 a G = = a L 1 i T l c D m p ( m l f c f t = = y s ( E m ( D * _ G A 1 b L L _ L $ $ $ $ $ $ $ $ $ c $ $ $ $ $ $ r $ $ $ $ O $ $ f $ $ t 0 0 0 1 1 0 U 2 1 ; l U = - = - l P - n A a u a E a i r - a a l a k o t e T c 1 E ( L U M / c * * L * L { { { { { { { { { a { { { { { { s { { { { G { { { { e . . . ; . . T ; ; T z z z z H A t * b c p L r v o 1 r b ; p ; t R R S a p A * - L K T M 3 _ l l * l O Y C K L A R W I M l U E U f f \ \ \ \ \ U \ \ \ \ r 3 9 0 6 9 I u I * z * * z * p A L e u o ; i T k ; d ) g o i a H H t t s A A T _ - I A ; s ; ; l ; G } } } } } } } } C _ _ _ _ _ _ v b d g p T e e a r 5 9 2 ; ; L t L G ( P G ( P r * P r c r t A e u ^ i r t l O O a e a + L L A L L / t ; U $ $ $ $ $ $ $ $ } v t t t t t a e e a s I t t l h c ; ; 5 I i I A + S A + S o y H t p a ) t c A n a A Z t _ / P P * ) I I P e T $ a ^ ^ ^ ^ r t l m i L a a p o a ; T l T M 1 I M 1 I d / A e * s l * t L a d l f * * e m ( D H H K ^ V T S a I r C U L K L e a t m } I ^ ^ h ^ l Y i Y M ) * M ) * u k ) m ( u k c i P l e a l l o 1 E A A _ A _ Y I d L i } _ } } } p } a a $ T C L a A i t A * ( A * ( c ( * p 1 p a ( l o H m d c o o C d - L * ) L L L = * y I a $ { $ $ $ s $ } } Y } } } } b = y = * G 1 * G 1 t - y o - p c - e n A c a e t g g o e R T a ; P ; = C _ T b t i $ $ $ $ $ $ r = = c A - c A - s 1 / r D l c 1 a * o n m o ( ( m l H A a H 1 _ s Y l + l ! a o ^ M l ^ M l ) l a E y u ) r f l s d a r a z p ; O r * A L t e 1 o ( ( ( ( = ( ( ( ( t 0 f 1 ( M ) ( M ) o ; ; l L ' m i u ^ t ' n ( ( u A - ) K ; ^ a = } n l l l l l l l l i - A ^ - A ^ f T ] u + n n ( s ] d p - - t ) 1 ^ _ ( t ( ( ( ( ( ( ( ( ( ^ ^ o o o o 1 o o o o o c 1 * ( E * ( o A l g c 1 ' ' r 1 1 a ) ; ( L - e 0 l l l l l l l l l C A n n n n n n n n n o ) c - T c - p p + a i ' t - ] ] o ) ) t ; 1 1 _ o o o o o o o o o } } g g g g g g g g n ; ( 1 A ( E r t r t v ] i A d ) ) i / A ) h n n n n n n n n n $ $ _ _ _ _ _ _ _ _ s + ) C + T o i ( i ; o L u o ( L * e g g g g g g g g g n n n n n n n n u 1 ; ) 1 A d m + o n P c + + n 1 P w l _ _ _ _ _ _ _ _ _ a a a a a a a a m ) ; ) L u a 1 n ' H t - H / p n n n n n n n n n m m m m m m m m p ^ ^ ) c l ) ' ] A i e e % % % A A ( e a a a a a a a a a ( e e e e e e e e t ( ( ; t i ) ] ) v p p L ; 1 r m m m m m m m m m l = = = = = = = = i - - i t ; ; i s s P + ( e e e e e e e e e o ' ' ' ' ' ' ' ' o 1 E o y t a z H G L = = = = = = = = = n D D C L R I O D n ) T n y ; ; A A 0 ' ' ' ' ' ' ' ' ' g i e o a i n u i ; A ( ' ) M , o c c l p i w i m _ s p n b s v t s a C E ] ) M u o a a r n a n a n c r s o k e p c n ) u ; A w t n p b o t g v r a o e u r r u o d ; l / , p s i o d e e e g m u c m A s t u e P C u u t r u r ' s i e n i p D v e n l r S _ t m a ' c e ) t n = t a t i e E t a ) I L ' p l ) t s m a ' t i s r F l b ' * , ) t ' i t e l P F i o u s r a F o ] C E i ) v n r a o n t i i s a r _ T o i R t C o c n i o s t c L A n t a ' o d t U l n c i t ^ C ' y t ) s u o R t i ' h c o ( , ) ' e t c r a i t ) i r - E ) ' s t ' t l y E t ' 1 T ) ' i ) e i l y ) ) A ) v ' t W a * L i ) y e s o w , t i t f ) P y W g i ; S e h c C I S i t i a , h g ' t p G o h ) y i A c t ' t M k ' ) a M ' ) l A ) ' ) ) ;

rbc_nonlinear_det1.mod

@ s % % % s v e % % % % p p r r r r r # t h a n e e p p p p p i e U o r d % p r r l l l l l n a n c ; e f f o o o o o c d e k e m r e e t t t t t l y x s p a f . . c c u ; p ; s k e e e t t c l r k a d e a e c x n _ _ ; ; ; e c ; t o d f f i w t s _ _ o o o v ; " e p u f s _ r r r d e r o i s e e y b r e r m i s s ; c T i e u m i i _ F o e s l u g g n P d v i l h h o s e g t t n s r h _ _ l h 1 y t s s i o ; t _ e o n c h s t l e k v i e u v a a n t p e r % % % l g u ( r _ u p p ; c e i ( e o s s p r m e i m - s r o o 0 e i d n . t o s . 1 d = i ; u s 3 n p = 0 c 4 0 " c ) ) o ; ; r r e c t l y !

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@ s % % % s v p v e % % % % p p d r r r r r # t h a e a n e e s p p p p p i e P o r r l d % p r r a l l l l l n a r c i u ; e f f m o o o o o c d e k e o e m r e e p t t t t t l y - s p d s a f . . c c l u ; a ; s s k e e e t t e c l r k a d n a e c x n _ _ ; ; ; e n ; 0 t o d f f 1 i w o . s _ _ o o o 0 v ; " u 0 u f s _ r r 0 r n 4 4 r o i s e e ; y b c , , e r m i s s ; c e e u m i i _ d 0 e s l u g g n 5 . v i l h h o T : 0 e g t t n F 8 1 r h _ _ l P ; ; y t s s i t _ e o n s h s t l e h i e u v a o n t p e r c g u ( r _ k p p ; c i ( e o % % % s p r m e i m s r o o e i d n t o s . d = i u s 3 n p = 0 c 8 0 " c ) ) o ; ; r r e c t l y !

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@ % % % i e e s e e e s % % % % p p d r r r r r # n p n t n p n t e e s p p p p p i P i s d e d s d e m p r r a l l l l l n e t a ; a v a ; a a e f f m o o o o o c r v = d a d k r e e p t t t t t l m a 0 y l = y e f . . c c l u a l ; ; ; ; e e e t t e c l r k a d n ; ( s c x n _ _ ; ; ; e e 1 u t o d f f 1 i w n - r _ _ o o o 0 v ; " t R e f s _ r r 0 r H o i s e e ; y b s O e r m i s s ; c h A v e u m i i _ o ) e s l u g g n c * r i l h h o k l y g t t n : o t h _ _ l g h t s s i T ( i _ e o n F 1 n s t l e P . g e u v a 0 t p e r i 5 i u ( r _ n ) s p p ; c c ; ( e o r s p r m e e e i m a t r o o s i d n e u o s . s p d = i s 3 n p c = 0 c e o 8 0 " r r ) ) m r ; ; a e n c e t n l t y l ! y b y 5 % % % %

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@ % % % i e e s e e e s s v e % % % % p p d r r r r r # n p n t n p n t h a n e e s p p p p p i P i s d e d s d e o r d m p r r a l l l l l n r t a ; a v a ; a c ; a e f f m o o o o o c e v = d a d k e k r e e p t t t t t l - a 0 y l = y s p e f . . c c l u a l ; ; ; ; ; s e e e t t e c l r k a d n ; ( a s c x n _ _ ; ; ; e n 1 ; u t o d f f 1 i w o - r _ _ o o o 0 v ; " u R p e f s _ r r 0 r n H e o i s e e ; y b c O r e r m i s s ; c e A i v e u m i i _ d ) o e s l u g g n * d r i l h h o p l s y g t t n e o t h _ _ l r g 1 h t s s i m ( : i _ e o n a 1 5 n s t l e n . ; g e u v a e 0 t p e r n 5 v i u ( r _ t ) a s p p ; c ; l ( e o s u s p r m h e e e i m o s t r o o c i d n k 0 u o s . : ; p d = i s 3 n T c = 0 c F o 8 0 " P r ) ) r ; ; i e n c c t r l e y a ! s e s p e r m a n e n t l y b y 5 % % % %

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@ s % % % h k a e % % % % p p d r r r r r # t i ( ( n e e s p p p p p i e R s 0 0 d m p r r a l l l l l n a e t ) ) ; a e f f m o o o o o c d t v = = k r e e p t t t t t l y u a 1 1 e f . . c c l u ; r l 0 ; e e e t t e c l r k a d n ; ; s c x n _ _ ; ; ; e u t o d f f 1 i w t r _ _ o o o 0 v ; " o e f s _ r r 0 r o i s e e ; y b E e r m i s s ; c q v e u m i i _ u e s l u g g n i r i l h h o l y g t t n i t h _ _ l b h t s s i r i _ e o n i n s t l e u g e u v a m t p e r i u ( r _ % s p p ; c % % ( e o s p r m e e i m t r o o i d n u o s . p d = i s 3 n c = 0 c o 4 0 " r ) ) r ; ; e c t l y !

rbc_nonlinear_stoch1.mod

@ s % % % s v e s # t h a n t i e U o r d o n a n c ; c c d e k e h l y x s p _ u ; p ; s s d e a i e c m t = u " e l r d 0 ( b . o c T 0 r _ F 4 d n P ^ e o 2 r n s ; = l h 1 i o , n c i e k r a f r % % % = _ 3 c 0 o , m p m e o r n i . o i d n s c = " 0 ) y c i v a ;

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@ s % % % % s v v e s # t h a a n t i e U U o r r d o n a n n c ; c c d e e k e e h l y x x s p p _ u ; p p ; s s s d e e a z i e c c m t t = = u " e e l r d d 0 0 ( b . . o c T d 0 0 r _ F i 4 1 d n P s ^ ^ e o c 2 2 r n s o ; ; = l h u 1 i o n , n c t i e k r a f f r a = _ c 0 c t , o o p m r e m r o s i n h o 1 o d . c s i k = n 3 c % % % % 0 " 0 ) y c i v a z ;