Hi there,
I've estimated a NK model with housing and the estimation results seem to be OK. However, I never managed to understand why the shocks in the historical decomposition graphs look way off the chart. Basically one cannot really expect that they are in reality so volatile and in my view, some of them look serially correlated. Rather, I guess the model adjusts them in such a way as to fit the smoothed variables. Any idea why this might be happenning? One of our co-authors believes it might be due to the lack of capital investment in the model (we've got only housing investment, but no capital in the production function), but I'm not quite sure whether that's really the reason but rather a technical issue maybe.
You can find attached the historical decomposition graphs as well as a pdf file with all possible graphs and tables (mode check plots, convergence plots, variance decomposition table, etc.).
Thank you very much in advance,
Best,
Petar