Hello everyone,
I have a small question concerning my model. I am running a two region model with common monetary policy. However, the model statisfied BK conditions only for specific values for the policy parameters. Parameters of the fiscal rules and of the Taylor rule. I am running a sensitive analysis at the end using dynare sensitivity. However I find something very strange. I try to run this dynare sensitivity for four parameters, namely, the two coefficients of the Taylor rule and two coefficients coming from the fiscal rule of each country. When I do that, I get graphs for the coefficient on inflation in the taylor rule and the two coefficients in fiscal rule but no graph for the coefficient on output gap of the Taylor rule. What is strange is that when I try to run the model with phi_y=0 the model does not satisfy BK conditions while it works if I set phi_y=0.5 which should imply that phi_y does play a role in determining the stability of the model. Do you know why then it does not appear in my graphs of the dynare sensitivity ?
Thanks in advance.
Best,
Hugo