In a DSGE model, when the shock is stohastic I get stability (i.e. the Blanchard-Kahn condition are satisfied) and I get a well defined solution of the model. However, when I apply the same shock in a deterministic environment I get stability, but not a solution. Any idea, why this could happen?
Without seeing the codes, it is impossible to tell.
Dear Pr. Pfeifer,
Thank you very much for your swift reply.
Please find attached the code, where I get a transition path when the TFP is stochastic (please see block 7.1), but do not get a transition path, while I get stability, when the shock is deterministic (please see block 7.2).
Thank you in advance for your time and consideration.
code_stoch_deter.mod (19.8 KB)