Why does the real interest rate decline on impact to a shock to taylor's rule in a New Keynesian Model with capital?


Please I have run a New Keynesian model with capital and found out that the real interest rate tend to decline on impact to a monetary policy shock. What could be a possible explanation for this?

Are you sure the real interest rate decreases and not just the nominal one? What you describe would usually violate the Taylor principle

It may have to do with

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