DSGE with simple adaptive learning rule

Hi everyone,
I’m trying to work with a small open economy DSGE model where I introduce a simple adaptive learning rule to form expectations of variables. Using this simple learning rule, I get oscillating IRFs, and I wonder whether that’s a reason to avoid estimating and using such a model? What implications do oscillating IRFs have? Any suggestions on what to do?

The code is attached for anyone interested: JPae2.mod (4.7 KB)

Oscillations like that are hard to justify economically. They indicate a complex eigenvalue. Usually that comes from timing problems. As the problem comes from your learning rule, it indicates that the learning rule you are using is not economically stable.

Ok, I’ll see if I come up with something else then. Thanks for answering!