Hi there,
I modified chapter 7 of the book ‘Understanding DSGE models’ by Celso Junior in a way, such that there are no wage rigidities (competitive labor market), there is no cost of under-utilization of maximum installed capacity and no fiscal authority(Only monetary authority). I get quite reasonable results, however could somebody help me on why inlflation and prices are not moving? Attached you will find the code
model3.mod (4.5 KB)
Another question: Shouldn’t actually all prices be expressed in real terms. I don’t know if this is the issue here…
Best