Working capital constraint have no effect on irfs

Stochastic simulations
1

Hi, I am new to dynare and trying to build a model for a small open economy for developing countries. I started from the simplest form and adding features step by step. I tried to introduce working capital constraint to the model but when I compared the impulse response functions, they didn’t seem to change. What might be wrong?

m2.mod (4.9 KB)

2

You can verify in the IRFs that there are indeed changes, but the effect is so small that you hardly notice it. Put differently, the propagation by your constraint is too small to matter.