Hey there,

first of all, I am new to this forum and an undergraduate student, so feel free to correct me if I do not follow ‘forum protocol’. I am currently trying to recreate a paper from Furlanetto et al. called ‘investment shocks and macroeconomic co-movement’. I simply used the log-linearized equations given in the paper, but it says that the Blanchard-Kahn conditions are not satisfied since some eigenvalues are >1. I am also struggling to get correct steady-state values ( = 0).

Since I feel completely overwhelmed by this task, I would appreciate any kind of help.

Thank you in advance!

PS: I also dont know yet how plotting works and can’t find a good source that explains it well. Let me know if you know a good guide. The current plot-code was given to me by the authors of the paper.

var k i m y cr wp n co r pi_p q rk c pi_w mc;

varexo e;

parameters delta beta rho wnpc eta lambda kappa_w phi alpha kappa_p

theta_p phi_pip gamma_g gamma_c gamma_i mu_p epsilon_w mu_w;

beta = 0.99;

lambda = 0.5;

alpha = 0.33;

delta = 0.025;

phi_pip = 1.5;

rho = 0.73;

gamma_g = 0.2;

gamma_i = 0.18;

gamma_c = 0.62;

mu_p = 1.2;

wnpc = (1-alpha)*(1/gamma_c) mu_p;*epsilon_w)

phi = 1; % Gali = 0.2

theta_p = 0.5; % Gali = 0.75

theta_w = 0.75;

eta = 7; % Gali = 1

epsilon_w = 4;

mu_w = epsilon_w/(epsilon_w-1);

phi_w = theta_w(1+phi

*(epsilon_w-1)/((1-beta*theta_w)

*(1-theta_w));*

kappa_p = (1-betatheta_p)*(1-theta_p)/theta_p;

kappa_p = (1-beta

kappa_w = (epsilon_w-1)/phi_w;

model (linear);

k = (1-delta)*k(-1)+delta*(i+m);

m = rho*m(-1)+e;
cr = wnpc*(wp+n);

co = co(+1)-(r-pi_p(+1));

q = (1-beta*(1-delta)

*rk(+1))+beta*q(+1)+beta

*delta*m(+1)-(r-pi_p(1));

i-k(-1) = eta*(q+m);

c = lambda

*cr+(1-lambda)*(c+(1/kappa_w)

*co;*

pi_w = betapi_w(+1)+kappa_wpi_w = beta

*n-wp);*

k(-1)-n = wp-rk;

y = alphak(-1)+(1-alpha)

k(-1)-n = wp-rk;

y = alpha

*n;*

pi_p = betapi_p(+1)+kappa_p

pi_p = beta

*mc;*

mc = wp-(y-n);

r = phi_pippi_p;

mc = wp-(y-n);

r = phi_pip

(1-gamma_g)

*y = gamma_c*c+gamma_i*i;

wp = wp(-1)+pi_w-pi_p; %siehe Furlanetto

end;

initval;

k = 0;

i = 0;

m = 0;

y = 0;

cr = 0;

wp = 0;

n = 0;

co = 0;

r = 0;

pi_p = 0;

q = 0;

rk = 0;

c = 0;

pi_w = 0;

mc = 0;

end;

steady;

check;

shocks;

var e; stderr 1;

end;

stoch_simul(order=1,irf=15);