the result of Variance Decomposition

[ahuca2008]

Dear all,
I built a model based on Iacoviello(2005),adding a bank sector. When I do the Variance Decomposition, I got the result that the impact of monetary policy shock on output and inflation more than 97%, however the impact of technology shocks less than 3%. Is this result correct? Or perhaps my model has some mistakes?
thanks for reading.

[jpfeifer]

That is hard to tell without detailed knowledge of the model, but given the evidence from other estimated models, your result is rather unusual and might be the result of a mistake (unless you have a good economic intuition why monetary policy shocks should suddenly be so important for business cycles)

[ahuca2008]

dear Jpfeifer ,
thanks for your replying. I think I need to check my parameter calibration, and modify my model. Almost each equation include the interest rate .So I guess this may be the reason why monetary policy shocks become so important in my model.