Compute paths for the observed variables and smoothly estimated structural shocks under alternative values for certain parameters, while the remaining are set to the initial or the posterior mode values.
When new paths for the observed variables are computed, the smooth estimates of the standardized state shocks using the baseline parameter values (initial values or posterior mode values) are used, while the alternative parameter values are used for simulating the new state variables. The smooth estimates of the measurement errors using the alternative parameters are used as well and together with the alternative parameter values for the A and H matrices in the measurement equation, the new observed data are simulated.
YADA also provides an alternative approach to the parameter scenario. Namely, to treat the observed variables as fixed at their original paths, but to compute smooth estimates of the state shocks under the baseline and the alternative parameter values. This gives the original smooth estimates along with new paths for the shocks.
Additional Information
• | A more detailed description about parameter scenarios can also be found in Section 11.9 of the YADA Manual. |
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