I am reading through Carlstrom and Feurst's 1997 paper Agency Costs, Net Worth, and Business Fluctuations: A Computable General Equilibrium Analysis and had a question, although it could apply to other papers as well. In the paper the authors derive 9 equations that uniquely derive an equilibrium in their model. Then in the next section they run empirical tests by starting at a steady state and then hitting the system with productivity and wage shocks to see the dynamics.
What I am confused about:
The equations that uniquely describe the solution already have shocks in them, so I am a little confused about what the steady state in the empirics section is. Here is the best answers I could come up with: They taking out the shocks, deriving the steady state, and then seeing how the shocks will move the system away from the steady state and then back over time. If anyone could confirm or deny this answer that would be great. This is a problem I have come across before when reading these papers with general equilibrium models with shocks.