The NK-DSGE Model has an odd IRF

I build a basic NK model, but the IRF is odd in time 1, it’s not smooth.

If I change it to a RBC model, or change the production function Y = A * K^ alpha * N^(1-alpha) to Y = A * N, the IRFs are OK.

I’m just stuck with this problem for days, and can’t find a solution by myself, need some help, thank you!

NK.mod (1.1 KB)

I had the same question.My TRF is also not smooth.Waiting for answers.

untitled.fig (142.4 KB)

Hope for your help.

@DAXIA Your results look very strange. Is this a first order approximation?
@jordima I don’t immediately spot anything strange. Are you sure this is not just regular economic behavior without investment adjustment costs?

Thanks for your reply. @jpfeifer

I’m confused about why it only occurs in time t+1, and then it returns to normal?

What’s the economic implication?

It seems because most adjustment is done after that period due to investment and hours jumping.

Thank you very much!

It’s interesting that almost all of the basic NK models are built without capital, maybe they came up with the same problem.

So in order to get a normal IRF, we must augment the model to a medium scale DSGE model?

Pretty much every model fit to the data that includes capital has some form of adjustments costs. The missing empirical hump-shape is often given as the reason for that.

Thanks for your kind reply, it really helps.