2 types 2 goods model


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:

  1. one intra-temporal Euler equation
  2. one inter-temporal Euler equation
  3. one budget constraint
  4. 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.

Thank you!

model1country.txt (1.2 KB)

From my limited experiences, it may due to the timing you set for capital, and/or bonds, e.g., K(-1) for production function Y=F(K(-1),N) and similar in budget constraints.

How did you close the model?