I’ve implemented occasional binding collateral constraints on Iacoviello (2015, ‘Financial Business Cycles’, RED) and got some impulse response to shocks with the OccBin toolkit under Dynare 4.5.7 (thanks to the toolkit developers).
Such results, however, are derived from parameter sets that are estimated when the collateral constraints are always binding. Therefore, I want to estimate such parameters under Dynare 5.2. Before implementing Bayesian estimation, I had to make sure the toy model (with occasional binding constraints, parameters that have been estimated by Iacoviello used here as it’s a calibration approach) working well under Dynare 5.2.
The problem I’ve encountered is, under Dynare 5.2, the impulse response shows that the collateral constraint is never binding after I set up the OccBin options and corresponding shocks, as the bottom right panel of the following figure demonstrates.
When I implement such occasional binding collateral constraints with OccBin toolkit under Dynare 4.5.7, the impulse response shows that the collateral constraint slacks for the first twelve periods and then back to the binding state, as the up-left panel of the following figure demonstrates.
220108_mh_fbc1-fbcOBC_9-16.pdf (17.1 KB)
I can’t figure out where I went wrong and hope someone can show me the way.
Thanks for your time.
Followings are required files.