I’m relatively new in DSGE modelling.
I try to build a very basic New Keynesian 2-country DSGE model (here I work with the non-linearized form) with households and firms as well as price rigidities (Calvo) but I cannot find the steady-state.
Each country has a final firm (aggregates home and foreign intermediate goods) and an intermediate firm (producing intermediate goods). Therefore, each country’s price index is a CES aggregate of foreign and domestic good’s prices. There is a domestic and a foreign bond. There is no govermnemt but there exists a monetary authority.
In this first version of the model, there are no habit persistence preferences and no kind of adjustment costs. Preferences depend on consumption and on labor effort.
There is a single shock: a technology shock.
I assume no growth in the model.
The entire model is deflated by domestic and foreign’s total price level.
Inflation is always gross inflation.
I think there is (at least) a problem with home/foreign NK Phillips Curves…
Thank you very much for your help!
RBCNK2CP_1.mod (9.9 KB)