I am implementing the non-linear BGG model and I am confused about what’s happening to my technology shock…
Here is the idea:
The production function is:
y = ((techno*l)^(1-alpha))*(k^(alpha));
where the variable techno is defined as:
(techno/technobar) - ((techno(-1)/technobar)^rhoTechno)*exp(eps_techno);
with technobar=1 and rhoTechno=0.95
in initval, I specified:
techno = technobar;
and in shocks:
shocks; var eps_techno = 0.1^2; end;
And, it seems that the shock has no impact on the dynamics (variance decomposition = 0 and IRF are not plotted).
I don’t see the problem… The .mod file is enclosed.
Thanks a lot!
model_FA.mod (5.77 KB)