I’m working on the new working paper by Galì "The Effects of a Money-Financed Fiscal Stimulus "(Dec 2016) and I have some difficulties/problems with the implementation of ZLB in dynare. ZLB is obtained with a demand shock. Galì replaces the money demand equation:
(Interest-log(beta))(moneydemand – consumption +etainterest) = 0 ]
under two constraints:
1- interest >= log(beta)
2- moneydemand >= consumption – eta*interest
I’m using OccBin (call_solve_two_constraints) but I can’t understand how to set the constraints. I attach the wp and the basic mod.
I am a young student so If You could help me I would really appreciate it. I kindly request any advice or suggestion.