impulse response

[monsoon]

This a GE credit cycle model designed on the lines of Gerali et al (2009). It produces impulse responses as any other model. However, I am puzzled by one issue - why there is no variation in r_ib (policy rate) and r_d (deposit rate) unlike Gerali et al. Even monetary policy shock does not affect the r_ib. Any help is highly appreciated.

[jpfeifer]

You need to figure out how your model works compared to the original one. It seems there is no shock that moven r_ib. That is very strange. I would say there is still an error.

[monsoon]

But the monetary policy equation is similar to what Gerali has. There is no change. And the monetary policy shock produces changes in all variables except the policy rate (r_ib). What could possibly be wrong?

[jpfeifer]

Start with Gerali's model and then change one element at a time to see when the problem arises.