This a GE credit cycle model designed on the lines of Gerali et al (2009). It produces impulse responses as any other model. However, I am puzzled by one issue - why there is no variation in r_ib (policy rate) and r_d (deposit rate) unlike Gerali et al. Even monetary policy shock does not affect the r_ib. Any help is highly appreciated.
utility_16.mod (10.3 KB)
You need to figure out how your model works compared to the original one. It seems there is no shock that moven r_ib. That is very strange. I would say there is still an error.
But the monetary policy equation is similar to what Gerali has. There is no change. And the monetary policy shock produces changes in all variables except the policy rate (r_ib). What could possibly be wrong?
Start with Gerali’s model and then change one element at a time to see when the problem arises.