Hi all,

I am trying to replicate the figures from Eric Sims notes about New Keynesian Model with both price and wage stickiness. I have some trouble with equations 2,11 and 13 but I can’t identify what is wrong. Can someone help me?

Thank you! NKM_pricewage_orig.mod (2.6 KB)

Your definition of

N_ss=((epsilon_w-1/epsilon_w)*(1/psi)*((v_ss)^(-sigma))*mc_ss*(((1-phi_w*((1+pi_ss)^(epsilon_w-1)))/(1-phi_w)))^((1+epsilon_w*eta)/1-epsilon_w)*(1-beta*phi_w*(1+pi_ss)^(epsilon_w*(1+eta)))/(1-beta*phi_w*((1+pi_ss)^(epsilon_w-1))))^(1/(sigma+eta));

is missing a bracket around (epsilon_w-1)

(epsilon_w-1)

Let me add that your mod-file does not handle parameter dependence correctly, because you hard-code the steady state values. That is not recommended.

NKM_pricewage_orig.mod (2.6 KB)