# Colinear problem **URL:** \ **Category:** Stochastic simulations\ **Created:** [22 October 2022 13:09 UTC](https://forum.dynare.org/t/colinear-problem/21271 "2022-10-22T13:09:50Z")\ **Posts on this page:** 1\ **Showing post:** 2
**Author:** ![jpfeifer](https://forum.dynare.org/user_avatar/forum.dynare.org/jpfeifer/32/5044_2.png) [@jpfeifer](https://forum.dynare.org/u/jpfeifer)\ **Post date:** [23 October 2022 12:18 UTC](https://forum.dynare.org/t/colinear-problem/21271/2 "2022-10-23T12:18:35Z")
How did you solve the typical unit problem in small open economy setups? See > [@Simple NK Model](https://forum.dynare.org/t/simple-nk-model/5018/13): > > A classical example is Schmitt-Grohe/Uribe’s (2003) paper on closing small open economy models. There is a unit root in the net foreign asset position if interest rates are constant/do not react to asset positions. Solutions in their case were to have a debt elastic interest premium or an endogenous discount factor. In closed economy models you can generate something similar by having a borrowing constraint where the Lagrange multiplier on the constraint increases in debt and therefore creates a… --- _[View the full topic](https://forum.dynare.org/t/colinear-problem/21271)._