Iacoviello 2005 - Share of impatient households

Stochastic simulations
1

Hello community,

I’m having some trouble with Iacoviello (2005). In the original paper, the authors use the labour share to calibrate each share of patient/impatient households.

However, I want to introduce population shares and not wage shares. I solved the model with that feature. However, when I change the shares and run a interest rate shock, the results I get are precisely the same.

Maybe something is wrong. I upload my mod file. Anyone can help?

Regards

Model1.mod (11.3 KB)
set_parameters_MP_Shock.m (1.9 KB)

2

Can you please explain which parameter you are varying and what I need to execute to see the problem.

3

Hello!

The parameters are omega, omegap and omegapp. They relate to the share of entrepreneurs (omega), patient households (omegap) and impatient households (omegapp). Just need to execute the “set_parameters” and then run the mod file. Log deviation stars with “l”. You can check lYR IRF.

I was expecting when changing the proportion of each agent to obtain different results. But that just occurs if I change the labour share of households, and not their population share. What am I missing?

Thank you!

Meanwhile: I figured out that the variables in levels change. But the relative changes to the steady state are equal when I change population shares.

4

That suggests that there is something economic going on and that it’s not a coding issue.

5

Dear @jpfeifer thank for your reply.

Im still struggling around this. Do you believe that normalising Y=1 (SS) can have this implication? i.e, the fact that at the SS Y=1 offsets the change in the households weights? Should I get a new Y SS instead?

6

That’s hard to tell, but I doubt it. You still would expect the shape of the IRFs to change.

7

Thats what I suspected. I might be doing something wrong on the aggregation. But what I do is the following: i) maximize patient and impatient households, ii) maximise entrepreneurs and since they are producers I weight on the production function the factors they use (K, housing and labour) by the respective shares of total population.Then aggregate the resource constrain and find the close solution for SS, normalising pi=1 and Yss=1.

Do you know of any materials that could be useful for me?

Thanks

@jpfeifer

8

What you describe sounds reasonable. I don’t know where the issue is.