Convergence Problem
Posted: Fri Jan 22, 2010 2:18 pmHi everyone,
I am trying to replicate the model in Gertler Gilchirst Natallucci (2007), basically a small open economy model with financial accelerator. I solved and log-linearized the model around ss. My problem is that althouhg the Blanchard-Kahn condition is satisfied, the some impulse response functions of the variables do not converge to the initial point after an temporary exogenous shock , rather converge to a new point. Does anyone have an explanation for this? Thank you very much in advance.
I am trying to replicate the model in Gertler Gilchirst Natallucci (2007), basically a small open economy model with financial accelerator. I solved and log-linearized the model around ss. My problem is that althouhg the Blanchard-Kahn condition is satisfied, the some impulse response functions of the variables do not converge to the initial point after an temporary exogenous shock , rather converge to a new point. Does anyone have an explanation for this? Thank you very much in advance.