Dynare forums

Dear Forum,

I am having trouble with the dynare timing convention in a simple RBC model with investment. In this model, households accumulate capital and rent it to firms. I'm running into two issues:

1) I've specified the Euler equation for consumption as follows:
MU[c(t)]/MU[c(t+1)] = Beta*(r+1-d);
This runs; however, I'm pretty sure that the correct specification would use the next period interest rate:
MU[c(t)]/MU[c(t+1)] = Beta*(r(+1)+1-d)
When I do this, I run into indeterminacy.

2) Ignoring this issue and using the contemporaneous interest rate, I'm still having trouble with the timing convention. If I follow the user guide and use the "stock at end of period" convention, I get bizarre impulse responses. I've attached two .mod files, one where I follow the "stock at end of period" convention for all equations, and one where I only do this for the capital accumulation equation. The later seems to give more "normal" results.

Any help you can provide on this issue would be greatly appreciated. Thanks!

Using the mod_r1a1l1_0b_stockend.mod with the correct timing for the return (it is expected)

Code: Select all

(c(+1)/c)^(1-sh)*((1-l)/(1-l(+1)))^(s*sh)= bh*(r(+1)+1-d);


runs and generates sensible IRFs.