I’m trying to replicate the first model (endogenous discount factor) from the paper “Closing small open economy models”. Everything works and looks fine so far, but the correlation between investment and output is -0.1575 instead of 0.66 (in the paper) and the standard deviation of investment is also way too high. Does anybody have an idea what might be the reason for this?
Thank you and best regards!
SGU1.mod (6.5 KB)