Timing Issues in baseline RBC - .mod files included

[eastnile]

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!

[jpfeifer]

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.