Optimal parameters leads IRFs were explosive

Optimal Policy
1

Dear dynare, I used the global optimizer cmaes to find optimal policy parameters, and the parameters’ LowBounds is -500, UpBounds is 500, and I got optimal parameters and run dynare file, the IRFs were explosive, I saw the paper use the restrictions :

(max(-oo_.irfs.R_eps_s+R)>1 | max(oo_.irfs.R_eps_s+R)>1 | min(-oo_.irfs.R_eps_s+R)<0 | min(oo_.irfs.R_eps_s+R)<0)

and use this restriction to get optimal parameters then would not lead explosive, I’m confused,
Please give me some help. Thanks so much.

1 Like
2

I would need more details here. Are you using a second order approximation? If yes, did you use pruning when generating the IRFs? If yes, then the IRFs cannot explode if you properly controlled for violation of Blanchard-Kahn conditions during your parameter search.