Hi,

I am working with a New Keynesian DSGE with third order approximation. The problem is that the IRFs generated by the model are fluctuating wildly leading to problems in interpretation. For example, labor whose steady state value is 0.31 is exhibiting values ranging from -300 to +300 and so on. Similarly output whose steady state value is 1 is varying between -1000 to +1000. My model is expressed in levels (not in exp form). I tried by reducing the size of the shock but it did not help.

Can anyone suggest what am I missing here. I am attaching the mod file.

Regards

Stevedem_2020_wthWageRigandHP.mod (9.4 KB)