2+ country RBC model

Stochastic simulations
1

Hi,

I am trying to write a code for multi-country rbc model with non-contingent bond in a smiliar setting as in Heathcote and Perri 2002.

The code runs well when I use two countries, but it gives me the error that “The rank condition ISN’T verified” and “Blanchard Kahn conditions are not satisfied: no stable equilibrium” when I use three or four countries.

What could be the reason for this?

2

That is hard to tell. Maybe it is the parameterization in this case.

3

Thank you for your reply. I realized that the code works only for some parameter values as you said.

  1. Can I assume that everything in the code is correct as long as it runs for a specific set of parameter values – no timing errors etc ?

  2. Is finding the parameter values that work completely depends on luck? Or is there any way that would help me find such values?

  3. Any suggestions what I should try to make the code work?