Dear Professor Pfeifer,
I was trying to replicate the TANK model of KMV(2019). I faced a problem. Then I found on the forum an issue where you advise to compute analytical solution. So I did maximumly close replication and steady state solution to the paper appendix. However, something I think is missing in their paper. Could you please, look through of my code. First of all they don’t have equation for the fiscal policy solvency, which I added on line 167. Second, given their equation, if I am shutting down my added equation, and adding the equation on lines 173-175, of course there will be perfect collinearity, since if you add two budget constraint you should exclude aggregate resource constraint. At least this is what I know from Walras low. If n-1 markets clear, then the nth one clears automatically. So I shut down one of the budget constraint. I guess the problem is that there is no policy rule for lump-sum taxes, so that government side is not solvent. Could you, please, guide me. Since according to their model there is 35 equations but 36 endogenous variables. I tried to add linear policy rule for lum-sum taxes, then model_diagnostics gives me that everything is ok, but by BK condition gives me indeterminacy. Here are the files. Thank you in advance.
kmv_tank.mod (4.4 KB)
kmv_tank_steadystate.m (3.5 KB)
paramfun.m (524 Bytes)
HANK_appendix.pdf (814.7 KB)