Non zero residuals of static equations

Steady state
1

Dear community, hope you are all doing fine.

I am conducting research on policy coordination regimes in the Dominican Republic, focusing on the interaction between fiscal and monetary authorities. My model extends Galí’s (2015) small open economy framework to analyze three equilibrium scenarios:

  1. Nash equilibrium
  2. Stackelberg equilibrium with fiscal leadership
  3. Stackelberg equilibrium with monetary leadership

The research aims to evaluate these coordination regimes through two lenses:

  • Economic efficiency (welfare analysis)
  • Administrative efficiency (sensitivity analysis)

However, I’ve encountered an issue: after computing the steady state, I found non-zero residuals in the fiscal rule across all three model specifications. I would greatly appreciate any guidance on resolving these residuals.

Thank you for your assistance.

Best regards,
Ian Contreras

For reference, I’ve attached the model files (.mod) and a MATLAB run script (run.m) to facilitate replication.

games.mod (12.3 KB)
run.m (137 Bytes)
monetary.mod (62 Bytes)
fiscal.mod (61 Bytes)
nash.mod (62 Bytes)