Hi everyone,
I am trying to replicate the model in Gertler Gilchirst Natallucci (2007), basically a small open economy model with financial accelerator. I solved and log-linearized the model around ss. My problem is that althouhg the Blanchard-Kahn condition is satisfied, the some impulse response functions of the variables do not converge to the initial point after an temporary exogenous shock , rather converge to a new point. Does anyone have an explanation for this? Thank you very much in advance.
Hi
You probably have unit roots in your model, or eigenvalues very close to 1. Please check the list of eigenvalues.
Best
Hi,
Thanks for your answer. I have solved the problem by increasing the elasticity of risk premium w.r.t. net foreign asset.
Best,
h.
I have problems with that model as well , can you share the code with me? It would help me a lot.
my email is imedilive@mail.ru
Thank you in advance
I have problems with that model as well , can you share the code with me? It would help me a lot.
my email is imedilive@mail.ru
Thank you in advance