I’ve been trying to simulate a toy model with DMP-type unemployment and Nash bargaining in a New Keynesian framework. However, somehow the matching efficiency shock plays no roles in shaping the impulse responses of many endogenous variables, say even the job finding rate (matching efficiency has a direct impact on it for sure). That’s unacceptable and really surprises me. I’m sure I derive and input the equilibrium conditions correctly. Really have no idea what the source is.
Plz see the attached mod file. Any insights are greatly appreciated. Many thanks in advance.
toy_model.mod (8.68 KB)