-2.46691e-11 for a variable in the steady state(initval =0))

Stochastic simulations
1

Hi.
I have defined a negative productivity shock in my model.
exogenous.mod (3.5 KB)
The result of this shock is correct for all variables. But the negative productivity shock has had a positive effect on Bank’s Profit and this variable have increased. While it should have had a negative effect on this variable . I do not know the reason for this positive effect.

Could this be the reason?:

Bank’s Profit (in the steady state) (pi_b)=0 in the initval block

Because the bank optimizes and based on this optimization, different variables are selected so that the Bank’s Profit is zero in the steady state.

But the steady state of this variable in dynare results is obtained as follows:

-2.46691e-11

Thank you in advance for your help

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2

pi_b is 0 for all practical purposes. That is most probably not the issue. Have you checked the individual components of the profit equation? A lot of the variables are predetermined, so the reaction of inflation will be crucial.