I am working on dynare code to three sector NK-DSGE closed economy model .Basically I am looking at the response functions to internal terms of trade shocks in the economy. Two of the sectors are flexible and one of them is sticky. I have written three DIS’s (two in terms of natural output level as deviations are zero) , one NKPC ,interest rate rule, aggregate equations and natural levels. The model does not satisfy Blanchard-Kahn conditions. Either I am not writing the model properly in dynare or this interest rate rule does not satisfy BK condition or parameter values are creating trouble, I seriously do not know. I am new to dynare and would be thankful if some of you could help me out. Kindly find my code attached.
tot2.mod (3.93 KB)