Hello,
I’m trying to extend Jermann and Quadrini (2012) into a two country model by now considering a case of financial integration (households across both countries are debtholders and equity holders for firms in both countries). I have found the steady state, but the Schur decomposition doesn’t go through. Any advice would be greatly appreciated. At this point in time I’m using V 4.5.7 of Dynare.
Thanks.
Integration_level.mod (3.6 KB)
I cannot spot anything. model_diagnostics points to a collinear relationship that seems to come from a unit root. Are you sure the solution to your model is unique?
w*n+(1/2)*(bond(-1)+bondstar(-1))+(1/2)*(d+dstar)=c+((1/2)*(bondstar-bond))/(1+r)+bond/R;
seems like the split between foreign and domestic may be indeterminate.
Thank you Dr. Pfeifer, I’ll refine my theoretical framework.
Three or more points , , , …, are said to be collinear if they lie on a single straight line. . A line on which points lie, especially if it is related to a geometric figure such as a triangle, is sometimes called an axis. Two points are trivially collinear since two points determine a line.