ECON 102 Lecture Notes - Lecture 9: Pareto Efficiency, Coronavirus, Standard Deviation
Document Summary
Ref to the diagrams in my notebook is endogenous that comes from hh (amount. We came up with the irf - single time shock (epsiolon = 0 except for the schock. Economy generates propogation that they consume/ work/ choose to invest gets accumulated, and the shock gets propagated over time) In reality, these shocks happen in every period, differences in epislon all the time because it comes randomnly from a normal distribution. Now, in t+1 there"s also an epsilon shock. Can assume that depreciation = 1, and plug into computer for simulations -> will look noisy like in slide 25. And you can compute mean/ stdev/ steady state of the simulations in slide 25. Means are similar to steady state -> fluctuations around steady state. When comparing to us economy, simulation economy fluctuations are around 70 observed fluctuations. Consumption is less volatile than output (captured by model, suggested by data)< because it"s a fraction of the output.
