I wanted to transform Chapter 5 of the book ‘Understanding DSGE’ into a version without wage rigidities, but with a competitive labor market. The code runs, however I obtain very strange result (see code). The reaction at the beginning is quite odd. I would appreciate very much if somebody could help me. I’m currently working with different models in order to understand the modelling process and the features better.
ch5_celso_competitive_labor_market.mod (2.3 KB)