CIA in Walsh

I am trying to solve the simple cia model in Walsh’s book page 112. I am unable to make the model converge. It is saying that the B-K conditions is not satisfied. Yet when I solve the model not using dynare but using Uhlig toolbox for example, I can get a solution. Where am I going wrong here. The file is posted as well as the equations. Any help would be appreciated. Thanks
dynare_help.pdf (28 KB)
cia1.mod (2.01 KB)

  1. Did you check the errata on Walsh web site?
  2. eq (20) doesn’t match the *.mod file
  3. eq (23) has an erroneous -1 at the end in the *.mod file
  4. it won’t matter for order 1, but you can’t combine the expectation, the way that you are doing: E(X)E(Y) isn’t equal to E(XY)