I am having trouble with the dynare timing convention in a simple RBC model with investment. In this model, households accumulate capital and rent it to firms. I’m running into two issues:
I’ve specified the Euler equation for consumption as follows:
MU[c(t)]/MU[c(t+1)] = Beta*(r+1-d);
This runs; however, I’m pretty sure that the correct specification would use the next period interest rate:
MU[c(t)]/MU[c(t+1)] = Beta*(r(+1)+1-d)
When I do this, I run into indeterminacy.
Ignoring this issue and using the contemporaneous interest rate, I’m still having trouble with the timing convention. If I follow the user guide and use the “stock at end of period” convention, I get bizarre impulse responses. I’ve attached two .mod files, one where I follow the “stock at end of period” convention for all equations, and one where I only do this for the capital accumulation equation. The later seems to give more “normal” results.