Dear professor, I use the Occbin method to simulate ZLB, then the interest rate figure seems not smooth,
your constraint is wrong.
constraint = 'i<1-1/beta'; constraint_relax ='i>1-1/beta';
it is better to use the shadow rate within constraints. E.g.
constraint = 'inot<1-1/beta'; constraint_relax ='inot>1-1/beta';
Thank a lot to you!!!
ascari.mod (4.3 KB)
Dear Professor, can You please, tell me what is wrong with my code where I want to impose a ZLB on my interest rate using Occbin toolkit.
Hi, first of all I am not a Professor. I am just a PhD Student.
You should check whether the periodic solution is a bug or a feature of your model.
My hunch is that there could be a typo somewhere in the equations.
For instance, if I change the calibration of
alpha = 0.25; the steady state is no longer computed properly.
Hi Max, sorry for bothering You again
I take the code from Christiano closed economy model and tried to impose a ZLB, but the code doesn’t work in a proper way, I guess, because, for example, when I set a shock value to be 1 the model crushes but when I put a smaller number it works. Can You, please, take a look and help me?
Thank You in advance
closed_economy_zlb.mod (2.7 KB)
It might be the case that the shock size matters for a solution to be feasible for the OccBin Toolkit.
You should also be aware of this issue if you work with a single shock in the first period.
Thank You for Your reply, is there a way to make the model work for any shock size?
But why should a 100 percent shock ever make sense? It would take forever to return to steady state and the ZLB not to bind.
Thank You Professor, I got it. Also, I have another question. Is it possible to the a welfare analysis using Occbin toolkit, since it solves the model using first order approximation?
Generally, I would say no, because welfare does often depend on higher order properties. But sometimes linear solutions suffice. It should depend on the model at hand.