Dynare forums

Hi everyone,
I'm running my codes (attached) in Dynare with 1st order linear approximation, but I get very weird shaped IRFs that have lots of kinks, and some of them go back to steady states more than once. My suspicion is that I am not using dynare properly, but I couldn't figure out which part goes wrong. Could anyone point to the right direction for me?
Or would log-linearising them manually before running them in Dynare generate more sensible IRFs (smooth or hump-shaped)?
Thank you very much!

Or this kinked IRF could be a model feature?

This looks like a model issue. Is it on purpose that your model has a unit root?

jpfeifer wrote:This looks like a model issue. Is it on purpose that your model has a unit root?

Hello jpfeifer,
The unit root is not on purpose. I'm new to Dynare, so I'm not sure what goes wrong. I checked the FOCs and market clearing conditions are correct. Could it be timing-convention problem or should I log-linearise the system? (I've got over 40 nonlinear equations, log-linearisation would prove very difficult)
Would appreciate some hints!

It could be a timing issue. Log-linearizing does not help. As the unit root is not on purpose, there still must be a mistake in your model.

jpfeifer wrote:It could be a timing issue. Log-linearizing does not help. As the unit root is not on purpose, there still must be a mistake in your model.

The mistake should be a timing mistake, right?


Thanks.

Maybe. It could be anything from a wrong equation, a typo in parameter initialization, a timing mistake...