Persistency in IRFs

Stochastic simulations
1

Hi everybody,

I cannot undestrand why my IRFs to a tfp shock in this two agent two sector environmental model are so persistent and seem to revert back to the steady state after hundreds of periods, even with a plausible value for the persistence of the TFP shock (0.9).

tank.mod (1.8 KB)

tank_steadystate.m (2.0 KB)

findss_tank.m (1.2 KB)

Thank you so much

2

The half-life of your shocks seems moderate. Mostly it’s less than 10 years. With capital accumulation that is not unusual.