Hello,

I have been unable to figure out exactly what is going wrong with my model. My mod file is attached. I am not sure if it is easy to detect without knowing the economic intuition behind the model. Basically, this is similar to Benigno and Nistico (2015) with a fiscal government and a central bank. The central bank equations (which are the second block in the model equations section) is where the issue comes in. I am not quite sure why the Euler equation(1), the Taylor rule(7) (where I am pegging the short-term interest rate) and the CB net worth law of motion (19) are collinear. I know I am missing something that is probably very obvious, but I would appreciate it if I can get some help with identifying the exact issue.

Thanks a lot

modfile.mod (2.63 KB)