Negative steady-state consumption in a two-country model

Dear Dynare users,

I am currently encountering problems with my two-country medium scale model with a financial accelerator.

I have asymmetric countries that exchange goods and financial services basically. At the steady state, when the asymmetry is too large (one countries weighs less that 38% of the economy), then the consumption goes below zero, disabling the computation of the steady state and the drawing of the IRFs.

Does anyone have any ideas as to how to fix this up, or known papers that cope with this issue? My research has currently proved unsuccessful.

Thank you very much for your help !


Please post the mod-file

You need to understand the intuition behind your result. How does your resource constraint imply negative consumption? Did you target a weird net foreign asset position?

hello, I am also building the similar model with you and come cross the same problem, can you tell me how to fix it? thx