ZLB with max operator doesnt work

Perfect foresight simulations
1

Hey everyone,

im currently trying to implement the ZLB into the “model of unconventional monetary policy” by Mark Gertler and Peter Karadi in a deterministic setting using the code of the Macroeconomic Model Database. As usual I am using the max operator on the Taylor Rule in order to do that. But as soon as the model hits the ZLB I always get the problem that the perfect foresight solution is no longer found and although the results look the way they should, there is the problem that the real rate jumps at the beginning. I also tried the perfect foresight model with a Levenberg-Marquardt mixed complementarity problem (LMMCP) solver and the way of writing the condition as outlined in the dynare manual (http://www.dynare.org/manual/index_26.html). It still doesn´t work although I am in a deterministic setting.

Does anyone have a clue why this is happening? Help would be greatly appreciated.

Best,
Ben

2

My mod-files

GK_own_steadystate.m (5.7 KB)
GK_own.mod (11.1 KB)

3

Here a picture of my results with and without ZLB. With ZLB the perfect foresight solution is not found and The real rate ® looks fishy. ZLB_comparison.fig (180.6 KB)

Help would realy be appreciated

4

No one got any idea :(?

5

Is this still current? If yes, the momentscheck-function is missing. I cannot run the file

6

Dear Mr. Pfeifer,

thank you very much for your response. The forum did not allow me to upload more than two files, thats why the function is missing. I will upload the files as soon as I am home. Help would be greatly appreciated.

Best,
Ben