Why do the welfare remain the same whether I set the order to 1 or 2?

Stochastic simulations
1

Dear Prof. Pfeifer,
The model contains financial friction which will change the business cycle fluctuation. However, no matter I set the stoch_simul order to 1 or 2, the welfare doesn’t change. Is there any mistakes in my code?

[name='welfare']
wel = log(c)+alppha*log(1-n)+betta*c/c(+1)*wel(+1);

Any suggestions will be appreciated, thank you.
Best wishes,
Xing

Jermann_Quadrini_2012_RBC.mod (7.5 KB)

2
  1. It should be
wel = log(c)+alppha*log(1-n)+betta*wel(+1);
  1. At order=1, mean welfare is
    -52.375066873682449
    while at order=2, it’s
    -52.368865365683639
3

Thank you very much. I can get a reasonable result now.

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