Why impulse responses fluctuate abnormally in OBC condition

Occbin
1

Dear Prof @JPfeifer,

I try to replicate Moran & Queralto’ model (2017). When shock is small, e.g. 0.05, not triggering occasionally_binding constraint, impulse responses are normal. When shock is bigger, e.g. 0.08, triggering occasionally_binding constraint, impulse responses are totally different and strange, variables fluctuate sharply. I can not find the reason. Thanks in advance.

Best regards

figure1.fig (137.2 KB)

figure2.fig (137.9 KB)

ss_basemodel.mat (4.7 KB)

basemodel.log (6.3 KB)

2
  1. You did not provide the mod-file.
  2. It is not unusual for the ZLB to create non-trivial dynamics. Agents are forward-looking and anticipate complicated movements in the real interest rate.
3

Dear Prof @JPfeifer,

I uploaded the wrong file. Below is the mod_file. While the dynamics in ZLB are non-trivial as you said, the shapes of impulse response dynamics should be continous and similar. The dynamics of impulse responses sharply jump and can not be explained in economic sense once triggering ZLB in the model. I find that the shapes of impulse response in ZLB are similar to the shapes in no ZLB and the differences are amplitudes in many models. Thanks in advance.

Best regards

basemodel.mod (7.2 KB)

4

Why is the real interest in your model fixed?

1 = betaUU*exp(r)/exp(pi(+1)) ;

Shouldn’t there be marginal utility showing up?