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gboehl
ZLB in getting_started.ipynb
Hello everyone,
first of all thank you Gregor for this fatastic library. I have a doubt about the zero-lower-bound ZLB in the example getting_started.ipynb. I do not understand why after running the Transposed Ensemble Kalman Filter (TEnKF) I get (as in the example) R values that are less than zero when the model should not allow it (also because the historical data never goes below zero) .
Thanks in advance
Hi Niko, Thanks for reaching out. As everything in the linearized model, the interest rate is expressed in terms of (percentage) deviations from steady state. The example model is calibrated to a steady state interest rate of 4% annualy, thus the steady state is ~1% quarterly in the model. The zero lower bound then is located around -1% in terms of deviations from st.st..
Have a look at my econpizza package if you are interested in fully nonlinear simulations in python.
Cheers, Gregor
Hi Gregor,
thank you very much for your speed and accuracy.
Wow! In the coming weeks I will also study the econpizza library then 🥇.
Back to the question, if instead of being interested in the percentage deviations from steady state I want to see the values in levels of interest rate and GDP, should I use the mod.obs function?
I am interested to see if the model performs well in historical values and then see if it produces appropriate forecasts.
Yes, exactly. mod.obs is what you want.
The model is just a small skale example NK model and will not perform well empirically. For that purpose you need at least a Smets-Wouters-type of model. This repo can get you started: https://github.com/gboehl/projectlib/tree/master/yamls
You should have a look at my ZLB estimation paper with Felix on ZLB estimations with this type of model: https://gregorboehl.com/live/bczlb_BS.pdf
Thank you very much Gregor, if you pass through Italy I owe you at least a beer!