I’m trying to use Gali and Monacelli’s (2005) model for a small open economy. However, I wanted to make some changes to fit the features of the economy I’m trying to model, which is an oil-exporting economy. The modifications to the original model are :
1/Households can only purchase domestic bonds ( so I abstract from international risk sharing).
2/ There are two types of firms in the economy;
- A nontradable goods-producing firm (which follows Gali and Monacelli’s monopolistic competitive firms with price-setting à la Calvo);
- Oil-producing firm.
3/ Oil is the only exported good.
4/ The monetary policy instrument is the effective exchange rate. (experimental rule)
The problem I face is; when I run my mod file I get an error message saying :
Warning: Matrix is singular to working precision.
In evaluate_steady_state (line 261)
In model_diagnostics (line 74)
In my_model.driver (line 333)
In dynare (line 293)
MODEL_DIAGNOSTICS: The steady-state cannot be computed
MODEL_DIAGNOSTICS: Steady-state contains NaNs
Error using print_info (line 32)
The steady state has NaNs or Inf.
Error in steady (line 102)
Error in my_model.driver (line 334)
Error in dynare (line 293)
evalin(‘base’,[fname ‘.driver’]) ;
I’m working with a log linearized model, and I went through my equations and my mod file several times but can’t find the problem, could you please help me.
I attach here the mod. file I’m working on. SOE_oil_exporting.mod (6.2 KB)