Endogenous Natural Resources in a DSGE Model

Steady state
1

Dear all,
I would be extremely grateful if anyone has an idea about how to solve my model: it’s from Hansen and Gross (2018), i am extending it by including a sovereign wealth fund.
I have been working on it, and made a separate steady state file as i thought i would be easier to spot the problem, but it doesn’t work and i am stuck.

this is what i had first :

Residuals of the static equations:

Equation number 1 : 0
Equation number 2 :0
Equation number 3 : 0
Equation number 4 : 0
Equation number 5 : 0
Equation number 6 : 0
Equation number 7 : 0
Equation number 8 : 0
Equation number 9 : 0
Equation number 10 : 0
Equation number 11 : 0
Equation number 12 : 0
Equation number 13 : 0
Equation number 14 : 0
Equation number 15 : 0
Equation number 16 : 0
Equation number 17 : 2.9583
Equation number 18 : 0
Equation number 19 : 0
Equation number 20 : 0
Equation number 21 : 0
Equation number 22 : 0
Equation number 23 : 0
Equation number 24 : 0
Equation number 25 : 0
Equation number 26 : 0
Equation number 27 : 1.1554
Equation number 28 : 0
Equation number 29 : 0
Equation number 30 : 0
Equation number 31 : 0
Equation number 32 : 0
Equation number 33 : 0
Equation number 34 : 0
Equation number 35 : 0
Equation number 36 : 0
Equation number 37 : 0
Equation number 38 : 0
Equation number 39 : 0
Equation number 40 : 0
Equation number 41 : 0
Equation number 42 : 0
Equation number 43 : 0
Equation number 44 : 0
Equation number 45 : 0
Equation number 46 : 0
Equation number 47 :0
Equation number 48 : 0
Equation number 49 : 0
Equation number 50 : 0
Equation number 51 : 0
Equation number 52 :
Equation number 53 : 0
Equation number 54 : 0
Equation number 55 : 0
Equation number 56 : 0
Equation number 57 : 0
Equation number 58 : 0
Equation number 59 : -1.0309
Equation number 60 : 0
Equation number 61 : 0.94916
Equation number 62 : 0.94

2

This will be hard to debug.

  1. Were you able to solve the original model before modifying it?
  2. Have a look at the equations with residuals. I am for example puzzled by the last ones.
SWF= (1-rho_w)*  i_star* (rer/rer(-1))* (pi_c)^(-1) * SWF(-1);

seems to imply that SWF=0

4

Dear Dr Johannes,
thank you for your response.
Actually I fixed the model, and it works, but i have another error message:
here are 21 eigenvalue(s) larger than 1 in modulus
for 20 forward-looking variable(s)

The rank condition ISN’T verified!

Total computing time : 0h00m01s

model_diagnostics(M_,options_,oo_)
MODEL_DIAGNOSTICS: The Jacobian of the static model is singular
MODEL_DIAGNOSTICS: there is 1 colinear relationships between the variables and the equations
Colinear variables:
Dbt
G
Colinear equations
62
MODEL_DIAGNOSTICS: The presence of a singularity problem typically indicates that there is one
MODEL_DIAGNOSTICS: redundant equation entered in the model block, while another non-redundant equation
MODEL_DIAGNOSTICS: is missing. The problem often derives from Walras Law.
Is there anything you can suggest please?

5

That sounds like a problem with Ricardian equivalence. Search the forum.