Hi, Im having problems computing the model. I used the nonlinear version of the small open economy, to which i added the equations corresponding to the sticky wage setup. When i compute the file matlabs sends this message: “The steadystate file did not compute the steady state”. The following equations seem to be the problem but i alredy checked the algebra beehind.
Equation number 26 : -0.0051916 : Recursive wage inflation
Equation number 29 : -0.25 : Wage dispersion
Am I missing something?
soe.mod (10.4 KB)
This is the Small open economy file i used as a baseline:
Gali_2015_chapter_8_nonlinear.mod (9.7 KB)
I think your implementation is incorrect? For example, you have
S_w = (1-theta_w)*(W_opt/W_real)^(-epsilon_w*(1+varphi)) + ((W_real/W_real(-1))*Pi)^(epsilon_w*(1+varphi))*S_w(-1);
But in the first term, the reset nominal wage should be compared to the nominal wage. But the biggest issue is the steady state computation. The wage markup (the wedge between the wage and the MRS) must be reflected in the steady state computations.