# Why the IRFs are so abnormal? Is it either normal or not?
**URL:** https://forum.dynare.org/t/why-the-irfs-are-so-abnormal-is-it-either-normal-or-not/26104
**Category:** Stochastic simulations
**Created:** [17 July 2024 09:37 UTC](https://forum.dynare.org/t/why-the-irfs-are-so-abnormal-is-it-either-normal-or-not/26104 "2024-07-17T09:37:24Z")
**Posts on this page:** 9
**Page:** 1
### Author:  [@Fra](https://forum.dynare.org/u/Fra)
#### Post date: [17 July 2024 09:37 UTC](https://forum.dynare.org/t/why-the-irfs-are-so-abnormal-is-it-either-normal-or-not/26104/1 "2024-07-17T09:37:24Z")
Hi everyone
I wanted to ask what the issue is with the IRFs, specifically whether it is a calibration problem or if the issue is more substantial.
Thanks much to help me.
[modelthesisFRA.mod](https://forum.dynare.org/uploads/short-url/lFDaTb5f1h8L6LUxsk4UIkyYV8Z.mod) (19.7 KB)
---
### Author:  [@jpfeifer](https://forum.dynare.org/u/jpfeifer)
#### Post date: [17 July 2024 10:44 UTC](https://forum.dynare.org/t/why-the-irfs-are-so-abnormal-is-it-either-normal-or-not/26104/2 "2024-07-17T10:44:40Z")
Those IRFs indeed look weird. They look like oscillations due to a complex eigenvalue. It’s either a timing problem or a wrong parameter setting (often in feedback rules).
---
### Author:  [@Fra](https://forum.dynare.org/u/Fra)
#### Post date: [17 July 2024 13:15 UTC](https://forum.dynare.org/t/why-the-irfs-are-so-abnormal-is-it-either-normal-or-not/26104/3 "2024-07-17T13:15:13Z")
Thanks, I’ve just tried changing the values of both tau1 and tau2 (tau1=0.1 and tau2=0.2), and the oscillation problem has disappeared. However, the IRFs do not seem to return to the steady state values.
[modelthesisFRA.mod](https://forum.dynare.org/uploads/short-url/zbndRYUXtmsmNSOCuOx68kGpkbq.mod) (19.7 KB)
Could you take a look at the new IRFs to check their correctness?
---
### Author:  [@jpfeifer](https://forum.dynare.org/u/jpfeifer)
#### Post date: [17 July 2024 14:40 UTC](https://forum.dynare.org/t/why-the-irfs-are-so-abnormal-is-it-either-normal-or-not/26104/4 "2024-07-17T14:40:33Z")
That looks a lot better. The IRFs do return to the steady state, but they are very persistent. See also
> [@Longlasting IRFs](https://forum.dynare.org/t/longlasting-irfs/13781/2):
>
> That is hard to tell. Most of the times, we actually want out model to feature persistence, i.e. endogenous propagation. In a quarterly model, 50 periods is a bit more then 10 years. That can still be considered a business cycle frequency.
---
### Author:  [@Fra](https://forum.dynare.org/u/Fra)
#### Post date: [12 August 2024 09:32 UTC](https://forum.dynare.org/t/why-the-irfs-are-so-abnormal-is-it-either-normal-or-not/26104/5 "2024-08-12T09:32:04Z")
Ok, thank you very much. Now I have another problem, which is the presence of indeterminacy. Basically, if I leave the current open settings (in particular 120 and 126), the model runs, but the IRFs (Impulse Response Functions) don’t seem perfect, as it appears that following a shock to the energy input price, inflation decreases (since the price of big firms good increases, but that of small-medium enterprises decreases, so I believe the problem lies with the latter). The issue is that if I use the same production function (line 124 and 126) for both firms (which is perhaps what I need to do), I get indeterminacy, but I don’t understand what it’s due to. Can you help me? It’s quite urgent.
Thanks in advance.
---
### Author:  [@Fra](https://forum.dynare.org/u/Fra)
#### Post date: [12 August 2024 09:34 UTC](https://forum.dynare.org/t/why-the-irfs-are-so-abnormal-is-it-either-normal-or-not/26104/6 "2024-08-12T09:34:17Z")
In my opinion the main point is to capture an increase of Psme\_1/Psme\_2/Pbf\_1/Pbf\_2 (maybe the marginal cost MC is important as well?).
---
### Author:  [@jpfeifer](https://forum.dynare.org/u/jpfeifer)
#### Post date: [13 August 2024 11:27 UTC](https://forum.dynare.org/t/why-the-irfs-are-so-abnormal-is-it-either-normal-or-not/26104/7 "2024-08-13T11:27:41Z")
I am getting a message about instabililty, not indeterminacy. Quite often the problem is a timing one, e.g. one where the timing of capital is wrong.
---
### Author:  [@Fra](https://forum.dynare.org/u/Fra)
#### Post date: [13 August 2024 12:16 UTC](https://forum.dynare.org/t/why-the-irfs-are-so-abnormal-is-it-either-normal-or-not/26104/8 "2024-08-13T12:16:23Z")
Yes sorry, the problem is about instability.
Where could the problem be that prevents me from opening both YSME and YBF production functions? I’m looking around but I don’t really know.
Thanks
---
### Author:  [@jpfeifer](https://forum.dynare.org/u/jpfeifer)
#### Post date: [13 August 2024 13:26 UTC](https://forum.dynare.org/t/why-the-irfs-are-so-abnormal-is-it-either-normal-or-not/26104/9 "2024-08-13T13:26:10Z")
As I said, it might be a timing problem. You may want to try the setup in a simpler model.