I am working on a model with BGG accelerator and a banking sector. The capital production firm has a standard Tobin’s Q quadratic adjustment cost for investment.
Somehow the IRF of the Q value flutuates in a Zig-zag manner, which causes all other variables in IRF to flutuate in zig-zag as well.
Has anyone come across this problem before and is there a simple reason behind it? Or the problem is more deeply rooted in my model equations or the parameter values?
Thanks in advance!