I have a simple question. I am working with an NK model which I have supplemented with some borrowing constraints. When I run the below code -simulating a TFP shock- the model seems to be solved finely and the impulse responses are generated. However, when I simulate an interest rate shock, the impulse responses all of a sudden have very small values (with -e’s) and no graph is produced. The model before adding the borrowing constraints was working fine for both shocks.
I would appreciate if anyone has some insight on this.
With many thanks,
Themodel_wFF.mod (2.7 KB)