I am trying to replicate a one paper called " Resource Windfall Allocation: " which is second part of one thesis and I attached it this here.
Although model started to work, the some IRF which I got from model have kink shape and the shock effects die out on some variable immediately. I could not really realize what the problem is and what it can be.
I would be very thankful If you help me about this problem.
Thanks in advance
Have a nice day
That is hard to tell, but your general approach is extremely error prone. You seem to have linearized the model while hard-coding the steady state values. That is not a good idea, because nothing assures consistency/correctness with the parameters of the model.
Dear Professor really thanks for your attention and spending your valuable time for us. When writer is solving model firstly he find numerical steady state value with solving nonlinear first order equation by matlab fsolve command. Then he log linearized model’s non linear first order equations( Because writer made some assumption and scenerio on these log linearized model).And he used these steady state numerical values in log linearized equation where it is necessary. I would like to ask whther this method is true or wrong. Thanks for your attention and help dear Professor.
If you help me dear Professor I would be very thankful
That approach is only valid when the nonlinear and linear model are consistent. And it sounds as if that is not the case in your model
Thanks for your attention and your valuable answer Professor.