Hello, I am working on a two-country DSGE, and trying to run a third-order perturbation to obtain impulse response functions.
I have written the following .mod file, and I keep getting the error that says there may be a non-redundant equation missing.
I have solved the first order conditions of the model by hand myself, but could not find what equation is missing.
I appreciate your valuable piece of advice. Thanks.
DSGE_Corsetti.mod (6.4 KB)
Thank you for your suggestion, Professor Pfeifer.
I have resolved the model by hand, and have found that the singularity rises in terms of goods market clearing for the two countries.
It seems that the four equations (two for goods market clearing, and two for defining firms’ profit) are causing the trouble.
The problem, here, is that I cannot think of an alternative equation that can replace these equations. I have arranged the equations by sector/agent, but I can’t identify the missing equation…
I am trying to build up a two-country DSGE with a final, tradable good producer in each country, and a single financial asset (bond). It’s my first time building up a two country DSGE, and any advice or suggestion is welcome.
I attach a modified version of my model. Thank you for time.
DSGE_Corsetti.mod (5.4 KB)
It’s hard to tell without knowing the model in detail.
model_diagnostics will provide some information on collinearity.