Dear all,
I am working with a New Keynesian model featuring the banking sector as in Gertler(2015). IRFs is so strange and cannot return to steady state.
Does this mean that something is going wrong with my code?
Any advice will be highly appreciated! thanks in advance.
deleveragesimul.mod (4.7 KB)
irfa.pdf (49.0 KB)
irfpi.pdf (47.1 KB)
The oscillating IRFs indicate that you have a complex eigenvalue. The reason usually is a wrong equation with e.g. a timing error.