Dear all

I am now working on a dynare program. However, the simulation result shows that the variance of output and other variables are far more than the real economy.

Does anybody know what the problem might be ?

Thanks a lot!

baseline.mod (3.68 KB)

In the real economy, the variance of output, investment and consumption is 0.013, 0.034 and 0.017 respectively.

[quote=“jpfeifer”]My guess is because

- You are not treating the data and the model variables the same way. When extracting the moments from the data, you surely used an HP-filter. But you did not filter your model variables. That’s why you cannot comapre them.
- Your calibration is weird. beta is really high and for some reason investment is much too volatile.[/quote]

Thank you so much. I guess you are right. Indeed, I did not treat the model variables with HP-filter. So how should I solve this problem, by transforming the variable?

The calibration is based on some papers that study China`s business cycle problem which might seem a little different from other papers.