I have construct a two-sector small open economy model, I calibrate the model parameters and the code can run well. However, the impulse response graphs seem to be weird. Some graphs show that the impulse response fluctuates up and down (not oscillating). I think it should respond to a shock smoothly. Could you please help me check what the problem is?
Here attached the code. Thank you very much!housing_labor.mod (6.3 KB)
Hi,
this is one of the cases where it is imposible to tell what is going on. model_diagnostics complains about a singularity issue. This might be a problem. But generally, the IRFs do not look completely weird. There may be some economic intuition behind what is going on. But without knowing the model setup and the shocks, it is impossible to tell. I can only suggest to use a simpler model to check what is going on.