Blanchard-Kahn condition & Non-ricardian HH


I’m working on a simple NK code, and step by step adding features to match my own model. I’m adding non-ricardian HH to the model, a I want to look at effect of fiscal policy, and as soon as I add that the Blanchard-Kahn condition is no longer satisfied. I’m going through all the parameter values to see if I can get the e-values smaller. But does anyone have any idea why this is happening, in case that doesn’t work?

Code is attached. Initial values are imported to the dynare file from a matlab steady-state file, so all the files are needed to run it.

Thank you very much in advance for your help.
steady_stateH.m (2.48 KB)
nk3H.mod (5.78 KB)
mainH.m (2.25 KB)

Check the necessary signs for debt feedback. Currently, if B_P goes up, spending increases. It could be the other way round depending on how you defined B_P.

Yes you’re right. I have changed that (B>0 means government is in debt). But still gives the same error.

Sorry, just editing to say, the original is actually correct. B>0 means government is in debt, so coefficient of log(B) is the government consumption should be negative. So that can’t be the problem with the Blanchard-Kahn condition. Do you know of any other reasons that might cause it?


Did you solve it? If it is not a matter of the parameters, it must be a timing problem. But this is hard to track without knowing the model.