Consumption and Real Exchange Rates with Incomplete Markets and Non-traded Goods

General DSGE Modeling Replication Attempts
1

Hello, I am trying to replicate the model of the paper by Gianluca Benigno and Christoph Thoenissen (which I attach below).
I was copying all the equations that they use in their work, where I got a total of 38 equations and 38 variables.

And the model throws me the following: Blanchard & Kahn conditions are not satisfied: indeterminacy.

with model_diagnostics (M_, options_, oo_): No obvious problems with this mod-file were detected.

I think that perhaps the error is in how I am modeling the shocks, since in the paper it puts them as matrices A = Omega * A (-1) + mu, where A is a matrix A = [AH, AF, AN, ANstar] and mu = [muH, muF, muN, muNstar].

Any help would be highly appreciated.

model.txt (6.4 KB) Referencia.pdf (751.1 KB)

2

No, it’s not about the exogenous process. You are missing explosive roots, so only turning the VAR explosive would help.

I would recommend checking all equations for their timing and signs.