Hi Prof. and to all,

I’m working on a regional dsge model. Variables and parameters with the index f refer to the rest of the country. Without this index - to the current region. I had the basic version of the model without investments and capital. The impulse response functions of this basic variant contained an inflation response (pi, pih) for all shocks.

As soon as I introduced investment and capital into the model - the inflation response to all shocks (except for price shocks) disappeared, although inflation correlates with all endogenous variables.

In a mode of calibration of parameters there is the same. The zip file includes the mod and data files (dsge model with investment). I really appreciate any help you can provide

Thank you for your answers

region.zip (4.3 KB)

Please upgrade to Dynare 4.5.2. You will see that your model features stochastic singularity. In addition to that, you are not handling parameter dependence correctly. Please take a look at Pfeifer(2013): “A Guide to Specifying Observation Equations for the Estimation of DSGE Models”

Thank Prof. Pfeifer for your answers.

Sorry for the confusion, my English isn’t too great.

But I have a question. In a mode of calibration of parameters (without parameter estimation) there is the same - the inflation response to all shocks (except for price shocks) disappeared. In this mode, there should be no stochastic singularity. The zip file includes the mod and data files in this mode.

Thank you very much in advance.

Best,

Leonid.

region1.zip (4.3 KB)

Thank Prof. Pfeifer for your answers.

Sorry for the confusion, my English isn’t too great.

But I have two question.1. In a mode of calibration of parameters (without parameter estimation) there is the same - the inflation response to all shocks (except for price shocks) disappeared. In this mode, there should be no stochastic singularity. The zip file includes the mod and data files in this mode.

2. Please explain what it mean - "You are not handling parameter dependence correctlyregion1.zip (4.3 KB)

- If you look at the displayed policy function, you will see that only
`xi_pf_f`

has a non-zero coefficient on inflation. You need to understand why. - The steady states are functions of the parameters. You need to handle this parameter dependence, e.g. via model-local variables (the ones with the pound operator #)

Dear Professor Pfeifer:

Thank you for your comments.

I got rid of the stochastic singularity. I also took in consideration Parameter Depedence. However, I have one more question: IRF for variable K looks very strange and evidences about unit root although theoretic moments for all variables, including K, look normal.Сan cause in the model specification? I am attaching the files.

Thank you very much in advance.

Best,

Leonid

.region2.zip (267.8 KB)

Capital is just very persistent. But that does not seem unusual

Dear Pfeifer,

Thanks for help!

Thank you very much Professor. Your help meant a lot.

But I have question.

Can linearized and non-linearized (level) variables (with steady_state=0) be present in one equation?

Thank you very much in advance.

Best,

Leonid