2-country NK model: non-zero residuals

Hi there

I’ve built a 2-country NK model with habit persistence preferences, capital adjustment costs and rigidities in price setting (Calvo).

4 equations show residuals when I want to find the steady-state. I’m not able to find a mistake, I’m looking for it since days… :worried:

I appreciate any kind of comment / hint / advise.

Many thanks!

NK_2country.mod (8.2 KB)

I’ve updated the file. Finally, only the labor supply equation causes difficulties.


2-country NK model.pdf (108.8 KB)

It seems your are fixing labor in steady state. In that case, you need to set the labor disutility parameter accordingly. See e.g. https://github.com/JohannesPfeifer/DSGE_mod/blob/master/RBC_baseline/RBC_baseline.mod

Thank you very much for your helpful comment :slightly_smiling_face: