I am modeling an economy consisting of a household, a bank, and an entrepreneur. The profit maximization of the bank is subject to its balance sheet and a CAR. I obviously use the bank balance sheet in calculating the FOCs but from what I have learned we should leave out one market clearing equation in dynare. I can reach the bank balance sheet equation by summing the budget constraint of the household and the loan requirement constraint of the entrepreneur (and also using the other two market clearing equations), so the bank balance sheet equation should be redundant and is proposedly the third unrequired market clearing condition. But, if i remove the bank balance sheet equation from dynare I have one less equation than variables, so I include it also in the equations, and, surprisingly dynare doesnt give any kind of error or warning and plots the IRFs. Am i doing it right? Or sth so complicatedly wrong is going on that besides including the bank balance sheet equation that everything is being calculated with no error?
Thank you in advance.
code4.mod (4.4 KB)