I am currently working on a two-agent New-Keynesian model, based on Bilbiie and Straub (2004), introducing different distortionary taxes. The model includes a Ricardian household (saver) and a non-Ricardian household (rule-of-thumb consumer). As they face different budget constraints, their consumption and labor dynamics should be different. The problem is that when I run the model in dynare, the consumption of both agents is the same. Does anyone know what could be wrong with the model or the code?
Thanks in advance.
chet.mod (3.0 KB)