Hi everyone, I am trying to simulate delayed policy response using Taylor rule (and also loss function in different case of model) .And the goal is to show that in case of the delayed reaction I need to react much more aggressively later on to bring back inflation, but I fail to achieve this result, and my reaction is less compared to immediate reaction. Is it because of interest rate persistence or there are any other reason behind it?
Thank you!
endo_nonlinear_delayed_rule_LR.mod (58.6 KB)
I attach the mod file here.