How lower persistence of productivity shock affects impulse

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Macroeconomics Problem Set - Short assignment on business cycle

In this exercise you are asked to explore the role of various parameters for the business cycle properties of the neoclassical growth model studied in class. Use dynare to solve the general model under these alternative parameterization.

1. Persistence 1: Assume ρz = 0:01: Explain how lower persistence of productivity shock affects the impulse responses and the second moments and persistence of macro variables.

2. Persistence 2: Assume ρz = 0:99: Explain how higher persistence of productivity shock affects the impulse responses and the second moments and persistence of macro variables.

3. Variance: Assume ρ2z = 0:0025: Explain how higher volatility of productivity shock affects the impulse responses and the second moments and persistence of macro variables.

Reference no: EM131738740

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