Weird Impulse Response Function


I constructed a model based on Iacoviello(2010) Housing market spillover … , and have some modification.
I exclude monetary sector so all variable presents in real term. I alter patient agent’s housing consumption that patient agent can only rent houses from agent2 , to see how houseprice and houserent act under borrowing constraint.

Some IRFs seems reasonable, but non-durable output(yc) and housing output(IH) seems weird, fltctuates up and down, a little like a oscillating shape, and some variables don’t come back to zeros.
I’ve check model several times but I could not found any mistake from timing and paras. Wish someone can give me some direction.

Here attach a code for log-linearized model, Thank you very much.model.mod (6.9 KB)


Your IRFs do not look unusual. Some overshooting is quite common and all IRFs come back to 0 in reasonable time


Maybe I care too much about the tail that can hardly to perfectly match to zero.

Thanks a lot for your answer !!


If your model features capital, the households will consume just a little bit more out of the capital stock for a long time due to the permanent income hypothesis/consumption smoothing.


thank you for reminding :slight_smile: