I am trying to solve a non-linear NK model at the ZLB using the OCCBIN toolkit (Guerrier and Iacoviello 2015).
In my model, I assumed the gross short-term rate (‘RS’, deposit rate) to be the rate hitting the zero lower bound (model_base_full_ZLB.mod (11.0 KB)), whereas the benchmark model follows Taylor-rule (model_base_full.mod (14.1 KB).)
The .m file to execute ZLB binding is
main_ZLB2.m (2.8 KB). Here, I let period 1-6 to be ZLB binding due to productivity shock(‘eA’) and then implement Quantitative Easing (QE) at period 7 ('eQ) to see the effect of QE during ZLB periods.
The relevant file that stores set of parameters is
param2.mat (735 Bytes)
MY PROBLEM is
I found something weird when plotting ‘figure, plot(1:nperiods,sim_QE_zlb_full(:,p_lnRS)*400)’ to see whether the interest rate is binding for period 1-6. The plot shows that the constraint ‘RTR<-log(RS_ss)’ is not binding for these periods and the ‘lnRS’ keeps going negative. Do I misunderstand something about the mechanism of the Occbin toolkt? I can see
violvecbool_ have ones, which indicates the zlb is binding. So, here in my code, zlb is binding?
I appreciate if you can help me !!