as I get too low volatility of investment relative to output in the extended RBC model I’m working on (investment is less volatile than output), I decided to go back to the most basic RBC model to understand how it succeeds in replicating the high volatility of investment relative to output.
So I relied on this presentation of the basic RBC model by Sims (www3.nd.edu/~esims1/stylized_facts.pdf) where he displays the model-generated business cycles moments which replicate the high volatility of investement relative to output.
However, when I tried to replicate the model, I couldn’t find at all the same moments (even though I rely on the same calibration of parameters). In particular, I find that investment volatility is lower than output volatility. I tried hp-filtered moments as well, simulated moments rather than theoretical ones, and second order versus first order approximation, but I still cannot find the moments that Sims displays in the last table.
The model could not be more simple, so I don’t understand what I am missing here. I attach my code below.
Similarly, when I run the basic RBC model code proposed on the Dynare examples page, I see that it misses the relative volatility of investment. But as far as I know, the high volatility of investment relative to output is not seen as a puzzling feature of the data in the literature and is replicated in most models, so where does it usually come from ?
Many thanks for any help !
BasicRBC.mod (650 Bytes)