Hi everyone,
My model is an extension of Gali and Monacelli (2005)'s small open economy paper, where the extension is that I have 2 focal small open economies A and B instead of just 1. I have had to specify A and B as having different relative risk aversion coefficients because if they were the same, there wouldn’t be 2 unique international risk sharing conditions and the model becomes unsolvable.
When I run my .mod file though, it is unable to find a steady state for the vast majority of the equations, although I’m expecting them to all be 0.
I have attached .mod file and a list of conditions although I’ve to stay consistent with GM(2005)'s notation as much as possible.
Does anyone have any idea on what is wrong and how I could fix this issue? Thank you very much for your time in advance!
Conditions.pdf (110.4 KB)
Draft1.mod (7.0 KB)