I built a simple NK-DSGE model and have introduced mortgage constraints following the approach of Kiyotaki & Moore (1997). In my model, the loan for an entrepreneur in period t is restricted by the total assets held in period t+1, denoted as K. The specific model and corresponding steady-state solution can be found in the attachment.
However, the impulse response functions of my model under monetary policy shocks exhibit an odd feature that doesn’t appear in the same steps of articles studying the same content: There is a significant and abrupt change between the first and second periods in terms of aggregate output, household consumption, and labor supplied by households, as illustrated below.
As this feature looked so wrong, I had to check my operations and thinking. Given your experience, could you give me some suggestions on whether there might be issues with the structural setup of my model or if there are errors in my parameter selection? Thanks!
A11_get_Calculate_diff.m (172 Bytes)
A11_get_variables1.m (733 Bytes）
model.mod (2.6 KB)