I replicating Iacoviello and Minetti (2006) “international business cycles with foreign and domestic lenders”
When I am using temporary shock, everything seems fine.
As soon as I am adding a spill over effect the responses for the two economies are not longer the same even though I am trying to input the same values.
I noticed that corr e_A, e_Af=0.187 makes the difference.
What am I doing wrong?
IBC.mod (3.8 KB)