IRF not returning to SS

[Zak]

Thanks a lot. I started again from scratches and reviewed the way subsidy enters the model. I finally noticed that I incorrectly mixed some real and nominal concepts (thanks to your feedback below). Now everything works fine.

NK-DSGE unit root

Then it must come from the informal sector. The problem is not the appearance of the price level per se. The price level is well-known to have a unit root in most New Keynesian models. The problem is that in your model it introduces a unit root in real variables. My guess is that you have a problem in at least one equation where you incorrectly mix real and nominal concepts.