Dear experts,
In the attachment is a extremely simple two-country model with labor, to test the capital flows caused by technology difference. It is a social planner’s problem, the two countries are identical in every aspect except for their different capital share values in the Cobb-Douglas production fucntion ( I tend to test CES functions later). The two country face a symmetric permanent technology shcok.
but Matlab warns:
Warning: Matrix is singular, close to singular or badly scaled.
Results may be inaccurate. RCOND = NaN.
In sim1 at 84
In simul at 93
In ces1_0 at 180
In dynare at 132
Warning: Matrix is singular to working precision.
In sim1 at 84
In simul at 93
In ces1_0 at 168
In dynare at 132
…
Some other things:
- The initial values I used here is what the program generates ( it can still solve the steady-state values before warning)
- In the end it warns: maximum number of iterations is reached (modify options_.maxit_), I changed the options, but nothing changed…
I wonder why this thing happens? I really appreciate your help!
two-country.mod (2.21 KB)