IRFs can not converge to steady state

[Duan]

Dear professor,
I tried a two-country open economy DSGE model. However, IRFs of some variables in this model can not converge to steady state,such as consumption, labor, price, wage, and so on. I used “model_diagnostics”, but it told me “MODEL_DIAGNOSTICS: No obvious problems with this mod-file were detected.”. I can not find the reason. Could you help me? Thanks a lot!

code.mod (4.6 KB)

[jpfeifer]

See the thread at Large values problem - #6 by jpfeifer
With periods=500, you will see the mean reversion.

[Duan]

Thanks a lot professor,
With periods=500, all variables in my model can revert to steady state. I have another two questions:
First, does “periods=500” mean that the shock in my model has a long-time influence on economy?
Second, are there any ways to make these variables revert to steady state earlier?

[jpfeifer]

Search the forum.

Longlasting IRFs

That is hard to tell. Most of the times, we actually want out model to feature persistence, i.e. endogenous propagation. In a quarterly model, 50 periods is a bit more then 10 years. That can still be considered a business cycle frequency.

comes to mind.

[Duan]

Thank you very much!