Hi dear @jpfeifer
I have again 2 question regarding the Rotemberg pricing NK with monetary shock.
1 - when I apply a 1 percent annualized contractionary shock, the nominal interest rate fall, but the real interest rate increases. Playing with the parameter I found out that the persistence parameter for the shock is the cause of this wrong response. for rho_nu < 5 the nominal rate goes up. Conversely in Calvo for rho_nu > 6 it goes down. Is it a problem insight the code itself or just as you mentioned in this topic just and endogenous response of the Taylor rule Please help see my code
2 - When there is interest rate smoothing in the taylor rule
R=R(-1)^rho_r*(1/bettaPi^phi_pi(Y/steady_state(Y))^phi_y)^(1-rho_r)*exp(nu);
is the monetary shock still autoregressive or just iid?
thank you
testenvoi1.mod (13.5 KB)