DSGE model with three households

General DSGE Modeling
1

DSGE_questions.pdf (40.3 KB)

Hi all,

I have a problem on solving the steady-state of a model with 3 households. Could you please tell me which condition am I missing?

Best,
Kevin

2

The budget constraint is a first order condition as well.

3

Hi Prof.,

Thanks for your reply. I considered the budget constraint already. The problem is that the Euler equations for all the households become the same (1/R = beta) in the steady-state, making the number of FOCs less than the number of endogenous variables.

4

Are you sure your model has a unique steady state? If all agents are the same, then any allocation of bonds and thereby consumption will be feasible.

5

Yes, the steady state is not unique. Thanks for your help!