I have a problem with the following dynare code where I try to solve a model with two households and two sectors. Each households work in the firm with the same name, the only interconnection between sector A and B is the inout-output structure between firm A and firm B. Firm A uses as an input , part of firm B output.
Dynare solves the steady states but does not solve the model, I get the following error message : One of the eigenvalues is close to 0/0 (the absolute value of numerator and denominator is smaller than
Can someone help see with this ?
I attach my dynare code.
Thank you very much.
That usually implies a fundamental singularity. Are you sure all variables in your model can be determined. For example, I see two prices showing up, but usually one of the goods is the numeraire whose price cannot be determined endogenously.
First of all thanks for your quick answer, indeed, I guess my problem comes from this. To simplify things I have removed prices in my model (both). I run again the model, dynare finds steady states but now I have another error message : Blanchard-Kahn conditions are not satisfied. I know what it means but I do not see where it comes from in my code. Could you please have a loot at it ?
I attach my new code.
Thanks in advance.
I have checked my equations and now it works. Can I just ask you a last question ?
Here my model is two households , two firms , households A work, invest and consume good from firm A and vice versa for households B, it is exactly the same as if I have two separate economies, the only link between A and B is due to the fact that firm A uses part of firm B output as an input. Do I need to normalize just one price or the two prices ? I have a doubt on this because I’m able to run the model in dynare when I normalize both prices but not when I give an explicit equation for one of the two prices.
Thanks in advance.
Usually, you normalize one price and everything else is relative to it. However, I don’t know your market structure. It depends e.g. on whether there is another numeraire, e.g. the good in which labor is remunerated.