No second moments


I have coded an RBC model with financial friction. I can run the code and get the IRFs but I cannot get the second moments. Instead I get dynare message ‘All endogenous are constant or non stationary, not displaying correlations and auto-correlations’.

Can anyo ne please point out why this may be?

simsopen.mod (2.7 KB)

When you set irf=2000, you will see that your financial shock has permanent effects. Thus, there is a unit root in your model and the unconditional second moments do not exist. As Dynare says, all variable are non-stationary

Dear Pfeifer,

Thanks for your response.

I do not see your point in my code. The IRFs are set to 20 periods (irf=20). Therefore what do you think might be the problem with the code causing non-stationary variables?

If you set irf=2000 you will see that the IRFs do not go back to 0 for your financial shock. You need to find out where this comes from.

Thank you Professor. I do see your point now. I will have a look now. Once again thanks.