Problem with irfs - not converging to steady state

[jpfeifer]

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

From one type to two types of agents

Are you sure that your model setup has a solution? The unit root seems like the type of problem that occurs in open economy setup models. Essentially, after a shock that affects debt, the permanent income hypothesis kicks in and the household just consumes the annuity out of its assets forever, never decumulating debt. It could now be that if you provide access to the bond market for the second household, it is set on a trajectory of permanently accumulating/decumulating assets, because the int…

may be relevant here.