Hi everyone,

Maybe this question has already been asked, but I can’t find the answer.

I have a DSGE model which when running first order approximation returns me correct theoretical moments (I mean at least the mean of my variables is equal to their steady state values). But when I run second order approximation using pruning the moments for my variables that I get make no sense. What could be the problem?

The results that I get using pruning:

THEORETICAL MOMENTS BASED ON PRUNED STATE SPACE

VARIABLE MEAN STD. DEV. VARIANCE

pie -1.9643 0.0979 0.0096

R -1.9842 0.1004 0.0101

GDP 64.1307 1.6299 2.6565

y_ex -7.3825 0.3194 0.1020