Timing Issues in baseline RBC - .mod files included

Dynare help (legacy posts)
1

Dear Forum,

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:

  1. 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.

  2. 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.

Any help you can provide on this issue would be greatly appreciated. Thanks!
mod_r1a1l1_0b_stockend.mod (1.17 KB)
mod_r1a1l1_0b.mod (1.18 KB)

2

Using the mod_r1a1l1_0b_stockend.mod with the correct timing for the return (it is expected)

code^(1-sh)((1-l)/(1-l(+1)))^(ssh)= bh*(r(+1)+1-d);
[/code]
runs and generates sensible IRFs.