Hello everyone,
I am trying to replicate the results of “Financial Frictions, Expectations and Business Cycle: Evidence from an Estimated DSGE Model”, only the rational expectations part. This model enriches the SW(2007) model with the Bernanke et al.(1999) financial accelerator.
I use the SW code and include the equations of the financial accelerator erasing the tobins’ q equation of SW.
I consider the seven SW observables plus the S&P500 (in diff) to characterized the networth of entrepreneurs and the spread between Baa and Aaa bond yields for the interest rate Premium.
These two last variables are demeaned out of estimation and therefore the measurement equations do not include any constant, only a measurement error (as I understand Rychalovska et al. 2017 do).
The problema is that the mode I get is so poor and frequently get stuck in some parameter bound. I have checked the model and the data set many times and I am not able to figure out why I cannot get similar results to Rychalovska et al. (2017).
Any comment would be really helpful. Thank you in advanced!
PS: I have already tried all the optimization routines.