Exercise with two tax regimes

Occbin
1

Hi everybody,

I am struggling with the OccBin tool and I cannot understand why in my model the piecewise linear dynamic overlap with the linear one for the whole response to the shock;

it is a 2 sector nk model with pollution externality where the carbon tax is supposed to switch between 2 fiscal regimes (high tax vs low tax) according to an exogeneously given trigger.

I would really appreciate any insight, thank you
occbin_buildup.mod (7.8 KB)

2

How is

[name='fiscal regime', relax='switch']
tau=tau_low;  %%if tau <= tau_trigger, tau=tau_low (relax);

[name='fiscal regime', bind='switch']
tau=tau_high; %%if tau > tau_trigger, tau=tau_high (bind);

supposed to work? You set tau to a fixed value that never changes. There is no movement at all in the variable that determines the switching.