Hello everyone,
I used dynareOBC to simulate impulse response functions for a standard new keynesian model. However, the obtained figures do not show the dotted line corresponding to the response without constraints. In addition, all responses are extremely small as if the endogenous variables barely move in the model.
I attached the mod file. Could you please help me to understand the problem?
Thank you.model.mod (2.8 KB)
Your model does not have a shocks block, so the shock variance is being set to a very small positive constant.
In any case your model does not seem to make much sense. You have a weird monetary rule that implies the steady state of R depends on phi. I suggest you sort the basic issues before you start introducing the ZLB.
Thank you very much for your reply. I made the changes to the model. I get responses this time but the magnitude is higher compared to response without BC. Is this related to the model calibration?
modelcorrec.mod (3.1 KB)
I can’t help with this. If your model doesn’t hit the bound IRFs will be identical with and without dynareOBC.
Thank you!