Dear all,
my model runs and can simulate shocks but the steady state values seem off and a government spending shock makes consumption negative. I do not believe that this is right but cannot find the issue.
Thankful for every piece of guidance!
habitat.mod (6.9 KB)
You seem to have rather complicated fiscal rules. They can cause this. Have you tried a simpler way of closing the model like lump sum taxes?
Yes, I introduced this fiscal rule because of explosiveness in the model. Is there some mistake in my NK mechanism or the constraints?
There is most likely an issue with the fiscal block. However, if the model does not work with lump sum taxes, there must be a mistake somewhere else, most likely a timing error unrelated to the fiscal block.