Dear professor,
I have encountered some weird responses in my impulse response graphs. For instance, when the Economy is hit by a negative productivity shock, I expect consumption which is shown by c to fall as well due to reduction in non-oil output production and household’s income. But, as it is depicted, in the second period, it jumps upward and then slopes down again. I thought maybe it is because of my intertemporal Euler equation. I have attached the pdf of FOC’s of the HH problem as well.
Thanks in advance
Regards,
Sarvin
finalround.mod (5.3 KB)
HH problem .pdf (38.6 KB)