Hi

I would appreciate it if someone here could take a look at my model and help me figure out what I may be doing wrong.

- I have a two-country model. A large open economy and a small open economy. The large open economy follows Sims and Wu (2019) closely.
- The small open economy only differs from the large one in terms of side and has a foreign goods and asset sector.
- If I run the large open economy (only) in dynare, the model diagnostics read “MODEL_DIAGNOSTICS: No obvious problems with this mod-file were detected”.
- But If I run the two country model in dynare model diagnostic read “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”:
- I have spent so much time trying to figure out which equation is creating the problem in my model but to no avail.

I would be extremely grateful if I can get help in identifying which equation is causing the problem in the two-countryclosed.mod (8.9 KB) closed_steadystate.m (2.8 KB) paramfile_closed.m (795 Bytes) paramfile_twocountry.m (843 Bytes) twocountry.mod (24.8 KB) twocountry_steadystate.m (6.6 KB) model. Kindly see attached files ( both closed model and two country model).