Hi! I am new in the community and the usage of dynare. I am still and undergraduate student trying to simulate the models (competitive equilibrium and social planner) proposed by Bianchi (2011): overborrowing and systemic externalities in the business cycle. I know the paper actually implements an ocassionally binding borrowing constraint. However, I assumed I can obtain IRFs from the only binding case. The only thing I modified was his modelling of the shocks, which originally followed a VAR(1) structure, and which I modelled as independent AR(1) procesess instead. Unfortunately, I am having troubles with oscillating IRFs in the social planner problem. Is there a timing issue? Could it be a calibration problem in this case? I attached the mod file. Any guidance about the problem will be much appreciated. social_planner_bianchi.mod (968 Bytes)
Typically it’s a timing or sign error. It’s always a good idea to recheck all equations.