I successfully ran a model with 1 agent and 2 goods which is perfectly symmetric in the goods dimension. The IRFs look great and I think it’s good.
I go from there to a 2 agent, 2 goods economy which is perfectly symmetric in both the goods and the agents. This is just a minor extension of the previous model, I just add the following:
- one intra-temporal Euler equation
- one inter-temporal Euler equation
- one budget constraint
- 1 aggregation equation across the consumption of the two individuals
However, when I run it, it runs into a rank problem:
There are 4 eigenvalue(s) larger than 1 in modulus
for 5 forward-looking variable(s)
The rank condition ISN’T verified!
Note I am not using capital so I don’t think it has anything to do with timing. My only thought was the symmetry might be the problem but I deviate from the symmetric case and still get the error.
Any thoughts? For details on the model, see the attached file.
model1country.txt (1.2 KB)