Continuing the discussion from Forward guidance shock:

I modified the monetary policy rule in your Gali (2008) code . In Mckay et al (2016)’ s paper, they applied an exogenous rule ‘real interest rate = natural rate +future monetary shock’. I replaced Taylor rule in Gali (2008) by ‘r_real=r_nat+ eps_nu(-20)’ in dynare, and got the error ‘blanchard kahn conditions are not satisfied: indeterminacy dynare’. Then, I used ‘r_real=r_nat+phi_pi*pi+eps_nu(-20)’ instead. The model is solved, but I can’t get the IRF of output to a 1 quarter drop in the real interest rate 20 quarters in the future as same as the Figure 1 In Mckay et al (2016)’ s paper. More specifically, I can’t plot the IRF figure that “real interest rate does not change until 20 quarters later, output jumps up by a full 1 percent immediately. Output then stays at this higher level for 20 quarters before falling back to steady state in quarter 21”.