I have a very basc question.
I have a model with two agents. One of them is a lender and has "negative debt" (let us call it d). The other one is a borrower and has positive debt (let us call it b). When Dynare simulate the IRF, I do not know how to interpret a positive deviation of "d". Does it mean that the lender is lending more or less?
Thank you again.
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Negative variable in equilibrium
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Negative variable in equilibrium
by lin123 » Fri Apr 24, 2015 8:37 am
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Re: Negative variable in equilibrium
by jpfeifer » Fri Apr 24, 2015 9:27 am
That depends on your sign convention in the model. If d=-0.8 in steady state means a person is indebted, an IRF where d goes up by 0.1 means that d goes from -0.8 to -0.7.
In contrast, if d=0.8 (i.e. positive) in steady state and the IRF is -0.1, it goes from 0.8 to 0.7.
Linearization or log-linearization do only affect the scaling but not the sign and thus do not alter anything.
In contrast, if d=0.8 (i.e. positive) in steady state and the IRF is -0.1, it goes from 0.8 to 0.7.
Linearization or log-linearization do only affect the scaling but not the sign and thus do not alter anything.
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