Problem with irfs - not converging to steady state

Dear All,

I am trying to add temporary shocks to an RBC model with two households and a different production funciton. The mod file is attached.temporary.mod (1.9 KB)

The issue is that the irfs do not converge, or they seem to converge to another steady state (if this is possible). I tried to shock other variables and tried to make the shocks much smaller, but the same happens. What could be the reason for this?

I can see that there is a 1 among the eigenvalues, could this be the problem? How can I solve this?

I am new to dynare, so sorry if the solution is straightforward.

And many thanks for your help, much appreciated.

Best,
Nora

Your model has a unit root, explaining the permanent IRFs.


may be relevant here.