Positive responses to uncertainty shocks

[zhanghuifd]

Dear friends,

I've encountered a simple problem in a model that uncertainty shock has positive effects on macro variables in the short run(when I set "replic = 5000").
Does it certainly happen in a model without price stickiness or wage rigidity?
Thanks a lot!

[jpfeifer]

In the long-run, GIRFs should show a zero effect of uncertainty shocks. In the short-run, you should see expansionary effects of uncertainty if you have flexible labor supply and no nominal rigidities.

[zhanghuifd]

Hi, professor, deeply thanks for your help!
Sorry, I made a mistake last thread. Right, I found the same results as literature without nominal rigidity using Basu's files about irfs. But whether there exits a phenomenon that output decreases while consumption increasing at the same time under the effects of uncertainty? May be that is unreasonable.

[jpfeifer]

You may get something like this with very high investment adjustment costs as those are going to prevent precautionary savings.

[zhanghuifd]

Yes, I think you are right! Thanks for your help!!