I am working with a DSGE model that includes public sector. Public debt is stabilized through some instruments (consumption, labour, and capital tax and government spending). I would like to use one instrument at a time and keep the others at their steady state values, I use steady_state(variable) but when I plot the IRF they responds to shocks. Surprisingly when I keep consumption tax rates and capital tax rates at their steady state values, it works fine.
Any help would be appreciated!!!
basic_a.mod (11.7 KB)
What do I have to do to see the problem?
Thank you very much jpfeifer!
If you run the code, you can see the IRF when government debt is hit by a 1% shock and labor tax rates adjust. If you plot transfers or government spending (T_ewbg or g_ewbg) they do not remains at their steady state levels. I fix them with the steady_state() command but it does not work, the IRF are close to zero but not zero. I try to substitute the steady-state values directly and I check the results that I previously found and there are the same.
Thank you again!
Are you referring to the movements in the order of 1e-16 in these variables? That is numerical error and is actually indistinguishable from 0.
Yes!. Ok, Thank you again!