Problem with declaration of index

Fra · April 24, 2024, 11:50am

Hi, I’m writing my mod.file for the master thesis and I encountered some problems. For example, now the mod doesn’t run due to an error message about wrong declaration of i (used as index in order to define the presence of two countries). Why is this happening (I tried several other command but without success? Could you also point out any other errors you notice?
Thanks very much in advance

modelthesisFRA.mod (17.5 KB)

// Financial heterogeneity between two countries. 
// Monetary, government spending, energy cost-push shocks. 
// Differences in proportion of small-medium firms and big firms. Type of firms distinguishs for values of alpha
   define N=2
   define countries=1:N
for i in countries 
var y_@{i} ysme_@{i} ybf_@{i} c_@{i} Isme_@{i} Ibf_@{i} ksme_@{i} kbf_@{i} Qsme_@{i} Qbf_@{i} r_@{i} rhosme_@{i} rhobf_@{i} asme_@{i} abf_@{i} H_@{i} Hhsme_@{i} Hhbf_@{i} W_@{i} 
pi1_@{i} pi_@{i} rK_@{i} n_@{i} nb_@{i} se_@{i} sb_@{i} rb_@{i} csme_@{i} cB_@{i} G_@{i} MC_@{i} rn_@{i} Psme_@{i} Pbf_@{i} esme_@{i} ebf_@{i} Pe_@{i} I_@{i} ;

parameters n_ksme_@{i} ksme_n_@{i} rbar_@{i} rBbar_@{i} k_y_@{i} y_k_@{i} psi_@{i} psib_@{i} gammaf_@{i} rhosmebar_@{i} rhobfbar_@{i} rhop_@{i} rhoasme_@{i} rhoabf_@{i} ybar_@{i} 
alpha_@{i} delta_@{i} theta_@{i} sigc_@{i} beta_@{i} sigh_@{i} csme_y_@{i} c_y_@{i} Isme_ysme_@{i} Ibf_ybf_@{i} ksmebar_@{i} kbfbar_@{i} esmebar_@{i} ebfbar_@{i} ysmebar_@{i} ybfbar_@{i} Wbar_@{i}
esme_ysme_@{i} ebf_ybf_@{i} G_y_@{i} rhog_@{i} phi_@{i} rhoa_@{i} Hbar_@{i} phi1_@{i} phi2_@{i} eps_@{i} Psmebar_@{i} Pbfbar_@{i} Pebar_@{i} rKbar_@{i} gammab_@{i} Ismebar_@{i} Ibfbar_@{i}
tb_@{i} nb_b_@{i} nb_ksme_@{i} ksme_nb_@{i} n_nb_@{i} nnb_nb_@{i} nb_nnb_@{i} n_nnb_@{i} cB_y_@{i} eta_@{i} sigma_@{i} rhoe_@{i} epsilon_@{i} b_@{i} Xi_@{i} vf_@{i} Qbfbar_@{i} Qsmebar_@{i};
end;

var z y_UM pi_UM v rpm pibar_UM ybar_UM ;          
parameters gamma bet0 bet1 bet2 tau1 tau2 sebar sbbar ;
varexo Serpm Seasme Seabf Seg See ; // the latter is shock to energy price ;

// calibration of exogenous parameters
 
for i in countries

alpha_@{i} = 0.33; // Share of contribution of capital and energy on GDP
delta_@{i} = 0.03; // Depreciation of capital 
theta_@{i} = 10.0; // Capital adjustment costs parameter 
sigc_@{i} = 0.75; // Intertemporal elasticity of substitution 
beta_@{i} = 0.99; // Discount factor
sigh_@{i} = 0.32; // Elasticity of labor disutility 
rhog_@{i} = 0.95; // Persitence of government spending
rhoa_@{i} = 0.97; // Persistence of technological shock 
gammaf_@{i} = 0.9831; // small-medium firms probability to survive
gammab_@{i} = 0.99; // bank probability to survive
tb_@{i} = 0.001; // part of capital trasferts to survival bank 
psi_@{i} = 0.025; // small-medium enterprises external financial premium elasticity
eta_@{i} = 1.1; // value that multilpies the value of marginal costs inside PC
sigma_@{i} = 6; // value of rigidity, i.e. cost of adjustment of price
b_@{i} = 0.045; //share of energy on production 
rhoe_@{i} = 0.95; // persistence of energy price shock process, calibrated as in Wei
epsilon_@{i} = 0.4; // CES production function of retailers parameter
vf_@{i} = -0.9; // CES capital/eneergy sobstitution parameter

end;

gamma=0.8; // "importance" of other country motions to domestic economy
bet0 = 0.9;
bet1= 1.1; 
bet2 = 0; 
psib_1=0.002; // banks external financial premium elasticity country 1
psib_2=0.002; // banks external financial premium elasticity country 2
nb_b_1=0.10; // Banks inside capital/loans ratio country 1
nb_b_2=0.10; // Banks inside capital/loans ratio country 2
tau1=0.7; //share on retailer production of big firms input country 1
tau2=0.3; // share on retailer production of big firms input country 2 

//steady state  

for i in countries

rhosmebar_@{i} = 1/1.1;
rhobfbar_@{i} = 1/1.1 ;
G_y_@{i} = 0.16;
n_ksme_@{i}=0.4;
//nb_b_@{i}=0.2;
Qsmebar_@{i}=1;
Qbfbar_@{i}=1;
ksme_n_@{i}=1/n_ksme_@{i};
nb_ksme_@{i}=nb_b_@{i}*(1-n_ksme_@{i});
ksme_nb_@{i}=1/nb_ksme_@{i};
n_nb_@{i}=n_ksme_@{i}*ksme_nb_@{i};
nnb_nb_@{i}=1+n_nb_@{i};
nb_nnb_@{i}=1/nnb_nb_@{i};
n_nnb_@{i}=1-nb_nnb_@{i};
rbar_@{i} = 1/beta_@{i}; //it would be both return of household and big firm rate on loans 
rKbar_@{i}=rbar_@{i}+0.005; //Rate sme > Rate bf
ksme_ysme_@{i} = (alpha_@{i}*rhosmebar_@{i})/(rKbar_@{i}-(1-delta_@{i}));
kbf_ybf_@{i} = (alpha_@{i}*rhobfbar_@{i})/(rbar_@{i}-(1-delta_@{i}));
csme_y_@{i}=(1-gammaf_@{i})/gammaf_@{i}*n_ksme_@{i}*ksme_ysme_@{i};
cB_y_@{i}=(1-gammab_@{i})*(1-tb_@{i})/(gammab_@{i}*(1-tb_@{i})+tb_@{i})*nb_ksme_@{i}*ksme_y_@{i};
ysme_ksme_@{i}= 1/ksme_ysme_@{i};
ybf_kbf_@{i}= 1/kbf_ybf_@{i};
Isme_ysme_@{i} = delta_@{i}*ksme_ysme_@{i};
Ibf_ybf_@{i} = delta_@{i}*kbf_ybf_@{i};
c_y_@{i} = 1 - G_y_@{i} - Isme_ysme_@{i} - Ibf_ybf_@{i} - csme_y_@{i} - cB_y_@{i} ;
esme_ysme_@{i}=rhosmebar_@{i}*alpha_@{i}/Pebar_@{i};
ebf_ybf_@{i}=rhobfbar_@{i}*alpha_@{i}/Pebar_@{i};
Psmebar_@{i}=1/1.1 ;
Pbfbar_@{i}=1/1.1 ;
end;
if i == 1 
ybf_ysme_@{i}= tau1^(epsilon)/((1-tau1)^epsilon) ;
else
ybf_ysme_@{i+1}=tau2^(epsilon)/(1-tau2)^epsilon) ;
end; 




model (linear);

for i in countries
    rhosme_@{i}=Psme_@{i}; // use this in order to do not change the rhosme
    rhobf_@{i}=Pbf_@{i}; // use this in order to do not change the rhobf
    //input of sme demanded by retailers 
    ysme_@{i}=(-epsilon_@{i}*Psme_@{i})+y_@{i}+(epsilon_@{i}*MC_@{i});
    //input of bf demanded by retailers
    ybf_@{i}=(-epsilon_@{i}*Pbf_@{i})+y_@{i}+(epsilon_@{i}*MC_@{i});
    //production funct of wholesale producers: sme
    ysme_@{i}=asme_@{i}+(alpha_@{i}*(ksmebar_@{i}^vf_@{i})*b_@{i}*ksme_@{i}+alpha_@{i}*(1-b_@{i})*(esmebar_@{i}^vf_@{i})*esme_@{i})/(b_@{i}*(ksmebar_@{i}^vf_@{i})+(1-b_@{i})*(esmebar_@{i}^vf_@{i}))+Hhsme_@{i}*(1-alpha_@{i}) ;
    //production funct of wholesale producers: bf
    ybf_@{i}=abf_@{i}+(alpha_@{i}*(kbfbar_@{i}^vf_@{i})*b_@{i}*kbf_@{i}+alpha_@{i}*(1-b_@{i})*(ebfbar_@{i}^vf_@{i})*ebf_@{i})/(b_@{i}*(kbfbar_@{i}^vf_@{i})+(1-b_@{i})*(ebfbar_@{i}^vf_@{i}))+Hhbf_@{i}*(1-alpha_@{i}) ;
    //equation of equilibrium in labor market
    H_@{i}=(Hhsme_@{i}/Hbar_@{i})+(Hhbf_@{i}/Hbar_@{i});
    //Capital accumulation of sme
    ksme_@{i}=(1-delta_@{i})*ksme_@{i}(-1) + delta_@{i}*Isme_@{i};
    //Capital accumulation of bf
    kbf_@{i}=(1-delta_@{i})*kbf_@{i}(-1) + delta_@{i}*Ibf_@{i};
    //net worth of bank 
    nb_@{i}=(gammab_@{i}*(1-tb_@{i})+tb_@{i})*rKbar_@{i}*((1/nb_b_@{i}-1)*(rK_@{i}-r_@{i}(-1))+rbar_@{i}/rKbar_@{i}*r_@{i}(-1)+rbar_@{i}/rKbar_@{i}*nb_@{i}(-1)-(1/nb_b_@{i}-1)*sb_@{i}(-1));
    // external financial premium
    rK_@{i}(+1)=r_@{i}+psi_@{i}*(-n_nnb_@{i}*n_@{i}-nb_nnb_@{i}*nb_@{i}+Qsme_@{i}+ksme_@{i});
    rb_@{i}=r_@{i}+psib_@{i}*(-n_nb_@{i}*nb_b_@{i}*n_@{i}-nb_@{i}+ksme_nb_@{i}*nb_b_@{i}*(Qsme_@{i}+ksme_@{i}));
    se_@{i}=rK_@{i}(+1)-r_@{i}; //remind that this holds only of small-medium enterprises
    sb_@{i}=rb_@{i}-r_@{i}; //same of se
    //Investment of sme
    Qsme_@{i} = theta_@{i}*delta_@{i}*Isme_@{i} - theta_@{i}*delta_@{i}*ksme_@{i}(-1);
    //Investment of bf
    Qbf_@{i} = theta_@{i}*delta_@{i}*Ibf_@{i} - theta_@{i}*delta_@{i}*kbf_@{i}(-1);
    //aggregate investment
    I_@{i}=Ibf_@{i}+Isme_@{i};
    //price of wholesale good offered by sme
    Psme_@{i}=ysme_@{i}*((1/(vf_@{i}-1))*((vf_@{i}/alpha_@{i})-1)-((ysmebar_@{i}-(Wbar_@{i}/ysmebar_@{i}*(1-alpha_@{i}))^(-1))*(1-(((1-alpha_@{i})*Wbar_@{i})/(ysmebar_@{i}-alpha_@{i}*ysmebar_@{i})^2))))+(((ysmebar_@{i}^((vf_@{i}/alpha_@{i})-1))/alpha_@{i})^(1/(vf_@{i}-1)))*((1-b_@{i})^(1/(1-vf_@{i})))*(Pebar_@{i}^(vf_@{i}/(1-vf_@{i})))*(vf_@{i}/(vf_@{i}-1))*(Pe_@{i})/(Psmebar_@{i}*((ysmebar_@{i}-(Wbar_@{i}/(ysmebar_@{i}-alpha_@{i}*ysmebar_@{i})))))+((ysmebar_@{i}^((vf_@{i}/alpha_@{i})-1)/alpha_@{i})^(1/(1-vf_@{i})))*(b_@{i}^(1/(1-vf_@{i})))*(rKbar_@{i}^(vf_@{i}/(vf_@{i})-1))*(vf_@{i}/(vf_@{i}-1))*(rK_@{i})+(((ysmebar_@{i}^((vf_@{i}/(alpha_@{i})-1)))/alpha_@{i})^(1/(vf_@{i}-1)))*((Pebar_@{i}^(vf_@{i}/(vf_@{i}-1)))*((1-b_@{i})^(1/(1-vf_@{i})))+(rKbar_@{i}^(vf_@{i}/(1-vf_@{i})))*(b_@{i}^(1/(1-vf_@{i}))))*(-1/(ysmebar_@{i}-(alpha_@{i}*ysmebar_@{i})))*W_@{i}*Wbar_@{i};
    //price of wholesale good offered by bf
    Pbf_@{i}=ybf_@{i}*((1/(vf_@{i}-1))*((vf_@{i}/alpha_@{i})-1)-((ybfbar_@{i}-(Wbar_@{i}/ybfbar_@{i}*(1-alpha_@{i}))^(-1))*(1-(((1-alpha_@{i})*Wbar_@{i})/(ybfbar_@{i}-alpha_@{i}*ybfbar_@{i})^2))))+(((ybfbar_@{i}^((vf_@{i}/alpha_@{i})-1))/alpha_@{i})^(1/(vf_@{i}-1)))*((1-b_@{i})^(1/(1-vf_@{i})))*(Pebar_@{i}^(vf_@{i}/(1-vf_@{i})))*(vf_@{i}/(vf_@{i}-1))*(Pe_@{i})/(Pbfbar_@{i}*((ybfbar_@{i}-(Wbar_@{i}/(ybfbar_@{i}-alpha_@{i}*ybfbar_@{i})))))+((ybfbar_@{i}^((vf_@{i}/alpha_@{i})-1)/alpha_@{i})^(1/(1-vf_@{i})))*(b_@{i}^(1/(1-vf_@{i})))*(rbar_@{i}^(vf_@{i}/(vf_@{i})-1))*(vf_@{i}/(vf_@{i}-1))*(r_@{i})+(((ybfbar_@{i}^((vf_@{i}/(alpha_@{i})-1)))/alpha_@{i})^(1/(vf_@{i}-1)))*((Pebar_@{i}^(vf_@{i}/(vf_@{i}-1)))*((1-b_@{i})^(1/(1-vf_@{i})))+(rbar_@{i}^(vf_@{i}/(1-vf_@{i})))*(b_@{i}^(1/(1-vf_@{i}))))*(-1/(ybfbar_@{i}-(alpha_@{i}*ybfbar_@{i})))*W_@{i}*Wbar_@{i};
    //consumption of household
    c_@{i} = c_@{i}(+1)-sigc_@{i}*r_@{i};
    //consumption of sme // doesn't exist for bf as they don't declare bankaruptcy
    csme_@{i}=n_@{i}; 
    //consumption of bank
    cB_@{i}=nb_@{i};
    //labor supply faced by  both bf and sme
    H_@{i}=(-sigh_@{i}/sigc_@{i})*c_@{i}+(sigh_@{i}*W_@{i});
    //interest rate short term motion 
    r_@{i} = rpm - pi_@{i}(+1);
   
    //technological shock of sm
    asme_@{i} = rhoasme_@{i}*asme_@{i}(-1) - Seasme ;
    //technological shock of bf
    abf_@{i} = rhoabf_@{i}*abf_@{i}(-1) - Seabf;
    //shock of government spending
    G_@{i} = rhog_@{i}*G_@{i}(-1) + Seg ;
    // energy price shock
    Pe_@{i} = rhop_@{i}*Pe_@{i}(-1) + See ;
end;
  
     if i == 1 //different equations between two countries
        pi_@{i}=gamma*pi1_@{i}+(1-gamma)*pi1_@{i+1} ; // value of inflation in first country
        c_@{i}=c_@{i+1}+sigc_@{i}*v(-1) ; // aggregate consumption
        y_@{i} = c_y_@{i}*c_@{i} + c_y_@{i}*((1-gamma)*(1-sigc_@{i})+(1-gamma)/(2*gamma-1))*v(-1)+(Ibf_ybf_@{i}+Isme_ysme_@{i})*I_@{i} + G_y_@{i}*G_@{i} +csme_y_@{i}*csme_@{i}+cB_y_@{i}*cB_@{i}; //resource constraint-->to modify
        rhosme_@{i}+(1-gamma)*v+ysme_@{i}+Hhsme_@{i}=W_@{i} ;// labor demand by sme
        rhobf_@{i}+(1-gamma)*v+ybf_@{i}+Hhbf_@{i}=W_@{i} ; // labor demand by bf
        Pe_@{i}=rhosme_@{i}+(1-gamma)*v+ysme_@{i}-((b_@{i}*(ksmebar_@{i}^vf_@{i})+(1-b_@{i})*(esmebar_@{i}^vf_@{i}))^(-1))*b_@{i}*vf_@{i}*((ksmebar_@{i}^vf_@{i})*ksme_@{i})-(((b_@{i}*ksmebar_@{i}^(vf_@{i})+(1-b_@{i})*esmebar_@{i}^(vf_@{i}))^(-1))*(1-b_@{i})*(vf_@{i}-1)*(esmebar_@{i}^vf_@{i})+(vf_@{i}-1)*(1-b_@{i}))*esme_@{i}; //optimal condition of energy sme
        Pe_@{i}=rhobf_@{i}+(1-gamma)*v+ybf_@{i}-((b_@{i}*(kbfbar_@{i}^vf_@{i})+(1-b_@{i})*(ebfbar_@{i}^vf_@{i}))^(-1))*b_@{i}*vf_@{i}*((kbfbar_@{i}^vf_@{i})*kbf_@{i})-(((b_@{i}*kbfbar_@{i}^(vf_@{i})+(1-b_@{i})*ebfbar_@{i}^(vf_@{i}))^(-1))*(1-b_@{i})*vf_@{i}*ebfbar_@{i}^(vf_@{i}-1)+(vf_@{i}-1)*(1-b_@{i}))*ebf_@{i}; //optimal condition of energy bf
        rK_@{i}*rKbar_@{i}=v^(1-gamma)*ysmebar_@{i}/(b_@{i}*(ksmebar_@{i}^vf_@{i})+(1-b_@{i})*(esmebar_@{i}^vf_@{i}))*alpha_@{i}*b_@{i}*(ksmebar_@{i}^(vf_@{i}-1))*rhosme_@{i}*rhosmebar_@{i}+rhosmebar_@{i}*(ysmebar_@{i}/(b_@{i}*(ksmebar_@{i}^vf_@{i})+(1-b_@{i})*(esmebar_@{i}^vf_@{i})))*(1-gamma)*(v^(1-gamma))*alpha_@{i}*b_@{i}*(ksmebar_@{i}^(vf_@{i}-1))*v+rhosmebar_@{i}*(v^(1-gamma))*(b_@{i}*((ksmebar_@{i}^vf_@{i})+((1-b_@{i})*(esmebar_@{i}^(vf_@{i}))))^(-1))*alpha_@{i}*b_@{i}*(ksmebar_@{i}^(vf_@{i}-1))*ysme_@{i}*ysmebar_@{i}+ksme_@{i}*(rhosmebar_@{i}*(v^(1-gamma))*b_@{i}*ysmebar_@{i}*((1/(b_@{i}*(ksmebar_@{i}^vf_@{i})+(1-b_@{i})*(esmebar_@{i}^vf_@{i})))*(vf_@{i}-1)*(ksmebar_@{i}^(vf_@{i}-1))-((b_@{i}*(ksmebar_@{i}^vf_@{i})+(1-b_@{i})*(esmebar_@{i}^vf_@{i}))^(-2))*b_@{i}*vf_@{i}*(ksmebar_@{i}^(2*vf_@{i}-1)))-theta_@{i}*((Ismebar_@{i}/ksmebar_@{i})^2))+(1-alpha_@{i})*Qsme_@{i}*Qsmebar_@{i}-Qsme_@{i}(-1)*Qsmebar_@{i}; //foc capital of sme
        r_@{i}*rbar_@{i}=v^(1-gamma)*ybfbar_@{i}/(b_@{i}*(kbfbar_@{i}^vf_@{i})+(1-b_@{i})*(ebfbar_@{i}^vf_@{i}))*alpha_@{i}*b_@{i}*(kbfbar_@{i}^(vf_@{i}-1))*rhobf_@{i}*rhobfbar_@{i}+rhobfbar_@{i}*(ybfbar_@{i}/(b_@{i}*(kbfbar_@{i}^vf_@{i})+(1-b_@{i})*(ebfbar_@{i}^vf_@{i})))*(1-gamma)*(v^(1-gamma))*alpha_@{i}*b_@{i}*(kbfbar_@{i}^(vf_@{i}-1))*v+rhobfbar_@{i}*(v^(1-gamma))*(b_@{i}*((kbfbar_@{i}^vf_@{i})+((1-b_@{i})*(ebfbar_@{i}^(vf_@{i}))))^(-1))*alpha_@{i}*b_@{i}*(kbfbar_@{i}^(vf_@{i}-1))*ybf_@{i}*ybfbar_@{i}+kbf_@{i}*(rhobfbar_@{i}*(v^(1-gamma))*b_@{i}*ybfbar_@{i}*((1/(b_@{i}*(kbfbar_@{i}^vf_@{i})+(1-b_@{i})*(ebfbar_@{i}^vf_@{i})))*(vf_@{i}-1)*(kbfbar_@{i}^(vf_@{i}-1))-((b_@{i}*(kbfbar_@{i}^vf_@{i})+(1-b_@{i})*(ebfbar_@{i}^vf_@{i}))^(-2))*b_@{i}*vf_@{i}*(kbfbar_@{i}^(2*vf_@{i}-1)))-theta_@{i}*((Ibfbar_@{i}/kbfbar_@{i})^2))+(1-alpha_@{i})*Qbf_@{i}*Qbfbar_@{i}-Qbf_@{i}(-1)*Qbfbar_@{i}; //foc capital of bf
        y_@{i}=((tau1*ybfbar_@{i}^((epsilon_@{i}-1)/epsilon_@{i})+(1-tau1)*ysmebar_@{i}^((epsilon_@{i}-1)/epsilon_@{i}))^(1/(epsilon_@{i}-1))*(tau1*ybfbar_@{i}^((epsilon_@{i}-1)/epsilon_@{i})*ybf_@{i}+(1-tau1)*ysmebar_@{i}^((epsilon_@{i}-1)/epsilon_@{i})*ysme_@{i}))/ybar_@{i}; //retailer production funct country 1 (tau1)
        (epsilon_@{i}-1)*MC_@{i}=(1/((tau1^epsilon_@{i})*(Pbfbar_@{i}^(1-epsilon_@{i}))+((1-tau1)^epsilon_@{i})*(Psmebar_@{i}^(1-epsilon_@{i}))))*(((-tau1^epsilon_@{i})*(1-epsilon_@{i})*(Pbfbar_@{i}^(1-epsilon_@{i}))*Pbf_@{i})-((1-tau1)^epsilon_@{i})*(1-epsilon_@{i})*(Psmebar_@{i}^(1-epsilon_@{i}))*Psme_@{i}); //marginal cost country 1 (depending on different values of tau between two countries)
        pi1_@{i}=beta_@{i}*pi1_@{i}(+1)+eta_@{i}*MC_@{i}/sigma_@{i}; //Phillips curve country 1
      else
        pi_@{i}=gamma*pi1_@{i}+(1-gamma)*pi1_@{i-1} ; // value of inflation in second country
        c_@{i}=c_@{i-1}+sigc_@{i}*v(-1) ; // aggregate consumption
         y_@{i} = c_y_@{i}*c_@{i} + c_y_@{i}*(gamma*(1-sigc_@{i})+gamma/(1-2*gamma)+sigc_@{i})*v(-1)+(Isme_ysme_@{i}+Ibf_ybf_@{i})*I_@{i} + G_y_@{i}*G_@{i} +csme_y_@{i}*csme_@{i}+cB_y_@{i}*cB_@{i};
        rhosme_@{i}+(gamma-1)*v+ysme_@{i}+Hhsme_@{i}=W_@{i}; //labor demand by sme
        rhobf_@{i}+(gamma-1)*v+ybf_@{i}+Hhbf_@{i}=W_@{i}; //labor demand by bf
        Pe_@{i}=rhosme_@{i}+(gamma-1)*v+ysme_@{i}-((b_@{i}*(ksme_@{i}^vf_@{i})+(1-b_@{i})*(esme_@{i}^vf_@{i}))^(-1))*b_@{i}*vf_@{i}*((ksmebar_@{i}^vf_@{i})*ksme_@{i})-(((b_@{i}*ksme_@{i}^(vf_@{i})+(1-b_@{i})*esmebar_@{i}^(vf_@{i}))^(-1))*(1-b_@{i})*vf_@{i}*esmebar_@{i}^vf_@{i}+(vf_@{i}-1)*(1-b_@{i}))*esme_@{i};//optimal condition of energy sme
        Pe_@{i}=rhobf_@{i}+(gamma-1)*v+ybf_@{i}-((b_@{i}*(kbf_@{i}^vf_@{i})+(1-b_@{i})*(ebf_@{i}^vf_@{i}))^(-1))*b_@{i}*vf_@{i}*((kbfbar_@{i}^vf_@{i})*kbf_@{i})-(((b_@{i}*kbf_@{i}^(vf_@{i})+(1-b_@{i})*ebfbar_@{i}^(vf_@{i}))^(-1))*(1-b_@{i})*vf_@{i}*ebfbar_@{i}^vf_@{i}+(vf_@{i}-1)*(1-b_@{i}))*ebf_@{i};//optimal condition of energy bf
        rK_@{i}*rKbar_@{i}=v^(gamma-1)*ysmebar_@{i}/(b_@{i}*(ksmebar_@{i}^vf_@{i})+(1-b_@{i})*(esmebar_@{i}^vf_@{i}))*alpha_@{i}*b_@{i}*(ksmebar_@{i}^(vf_@{i}-1))*rhosme_@{i}*rhosmebar_@{i}+rhosmebar_@{i}*(ysmebar_@{i}/(b_@{i}*(ksmebar_@{i}^vf_@{i})+(1-b_@{i})*(esmebar_@{i}^vf_@{i})))*(gamma-1)*(v^(1-gamma))*alpha_@{i}*b_@{i}*(ksmebar_@{i}^(vf_@{i}-1))*v+rhosmebar_@{i}*(v^(1-gamma))*(b_@{i}*((ksmebar_@{i}^vf_@{i})+((1-b_@{i})*(esmebar_@{i}^(vf_@{i}))))^(-1))*alpha_@{i}*b_@{i}*(ksmebar_@{i}^(vf_@{i}-1))*ysme_@{i}*ysmebar_@{i}+ksme_@{i}*(rhosmebar_@{i}*(v^(1-gamma))*b_@{i}*ysmebar_@{i}*((1/(b_@{i}*(ksmebar_@{i}^vf_@{i})+(1-b_@{i})*(esmebar_@{i}^vf_@{i})))*(vf_@{i}-1)*(ksmebar_@{i}^(vf_@{i}-1))-((b_@{i}*(ksmebar_@{i}^vf_@{i})+(1-b_@{i})*(esmebar_@{i}^vf_@{i}))^(-2))*b_@{i}*vf_@{i}*(ksmebar_@{i}^(2*vf_@{i}-1)))-theta_@{i}*((Ismebar_@{i}/ksmebar_@{i})^2))+(1-alpha_@{i})*Qsme_@{i}*Qsmebar_@{i}-Qsme_@{i}(-1)*Qsmebar_@{i}; //foc capital of sme country 2
        r_@{i}*rbar_@{i}=v^(gamma-1)*ybfbar_@{i}/(b_@{i}*(kbfbar_@{i}^vf_@{i})+(1-b_@{i})*(ebfbar_@{i}^vf_@{i}))*alpha_@{i}*b_@{i}*(kbfbar_@{i}^(vf_@{i}-1))*rhobf_@{i}*rhobfbar_@{i}+rhobfbar_@{i}*(ybfbar_@{i}/(b_@{i}*(kbfbar_@{i}^vf_@{i})+(1-b_@{i})*(ebfbar_@{i}^vf_@{i})))*(gamma-1)*(v^(1-gamma))*alpha_@{i}*b_@{i}*(kbfbar_@{i}^(vf_@{i}-1))*v+rhobfbar_@{i}*(v^(1-gamma))*(b_@{i}*((kbfbar_@{i}^vf_@{i})+((1-b_@{i})*(ebfbar_@{i}^(vf_@{i}))))^(-1))*alpha_@{i}*b_@{i}*(kbfbar_@{i}^(vf_@{i}-1))*ybf_@{i}*ybfbar_@{i}+kbf_@{i}*(rhobfbar_@{i}*(v^(1-gamma))*b_@{i}*ybfbar_@{i}*((1/(b_@{i}*(kbfbar_@{i}^vf_@{i})+(1-b_@{i})*(ebfbar_@{i}^vf_@{i})))*(vf_@{i}-1)*(kbfbar_@{i}^(vf_@{i}-1))-((b_@{i}*(kbfbar_@{i}^vf_@{i})+(1-b_@{i})*(ebfbar_@{i}^vf_@{i}))^(-2))*b_@{i}*vf_@{i}*(kbfbar_@{i}^(2*vf_@{i}-1)))-theta_@{i}*((Ibfbar_@{i}/kbfbar_@{i})^2))+(1-alpha_@{i})*Qbf_@{i}*Qbfbar_@{i}-Qbf_@{i}(-1)*Qbfbar_@{i}; //foc capital of bf country 2
        y_@{i}=((tau2*ybfbar_@{i}^((epsilon_@{i}-1)/epsilon_@{i})+(1-tau2)*ysmebar_@{i}^((epsilon_@{i}-1)/epsilon_@{i}))^(1/(epsilon_@{i}-1))*(tau2*ybfbar_@{i}^((epsilon_@{i}-1)/epsilon_@{i})*ybf_@{i}+(1-tau2)*ysmebar_@{i}^((epsilon_@{i}-1)/epsilon_@{i})*ysme_@{i}))/ybar_@{i}; //production funct of retailer country 2 (tau2);
        (epsilon_@{i}-1)*MC_@{i}=(1/((tau2^epsilon_@{i})*(Pbfbar_@{i}^(1-epsilon_@{i}))+((1-tau2)^epsilon_@{i})*(Psmebar_@{i}^(1-epsilon_@{i}))))*(((-tau2^epsilon_@{i})*(1-epsilon_@{i})*(Pbfbar_@{i}^(1-epsilon_@{i}))*Pbf_@{i})-((1-tau2)^epsilon_@{i})*(1-epsilon_@{i})*(Psmebar_@{i}^(1-epsilon_@{i}))*Psme_@{i}); //marginal cost country 2 (depending on different values of tau between two countries);
        pi1_@{i}=beta_@{i}*pi1_@{i}(+1)+eta_@{i}*MC_@{i}/sigma_@{i};  // Philliphs curve country 2
     end;



  // Values of Monetary unit : inflation, output and relied value in steady state
    pi_UM=(pi_1+pi_2)/2; 
    y_UM=(y_1+y_2)/2;
    pibar_UM=(pi_1-pi_2)/2;
    ybar_UM=(y_1-y_2)/2; 
 // Values of rpm
    rpm= bet0*rpm(-1) + (1-bet0)*(bet1*pi_UM + bet2*y_UM) + Serpm;
z=v;
sebar=se_1-se_2;
sbbar=sb_1-sb_2;
end;

        steady;
        check;
        shocks;
        var Serpm; stderr 1 //monetary shock ;
        //var Seg; stderr 1 //government spending shock ;
        //var Seasme; stderr 1 //technological shock for sme ;
        //var Seabf; stderr 1 //technological shock for bf ;
        //var See; stderr 1 //price of energy shock ;
        
        end;
        
        stoch_simul (irf=20);

jpfeifer · April 24, 2024, 12:22pm

You are not proper macroprocessor syntax. See

Fra · April 24, 2024, 4:15pm

Thanks very much for answer. I tried to do exactly what was done in the example mod, but now I’ve encountered this other error: Macro-processing error: backtrace…

variable: modelthesisFRA.mod:158.26-39 Index out of range
@#define: “modelthesisFRA.mod” line 158, col 1-39

I paste my updated file here:

// Financial heterogeneity between two countries. 
// Monetary, government spending, energy cost-push shocks. 
// Differences in proportion of small-medium firms and big firms. Type of firms distinguishs for values of alpha
   @#define N=2
   @#define countries=[1:N]
@#for i in countries 
var y_@{i} ysme_@{i} ybf_@{i} c_@{i} Isme_@{i} Ibf_@{i} ksme_@{i} kbf_@{i} Qsme_@{i} Qbf_@{i} r_@{i} rhosme_@{i} rhobf_@{i} asme_@{i} abf_@{i} H_@{i} Hhsme_@{i} Hhbf_@{i} W_@{i} 
pi1_@{i} pi_@{i} rK_@{i} n_@{i} nb_@{i} se_@{i} sb_@{i} rb_@{i} csme_@{i} cB_@{i} G_@{i} MC_@{i} rn_@{i} Psme_@{i} Pbf_@{i} esme_@{i} ebf_@{i} Pe_@{i} I_@{i} ;

parameters n_ksme_@{i} ksme_n_@{i} rbar_@{i} rBbar_@{i} k_y_@{i} y_k_@{i} psi_@{i} psib_@{i} gammaf_@{i} rhosmebar_@{i} rhobfbar_@{i} rhop_@{i} rhoasme_@{i} rhoabf_@{i} ybar_@{i} 
alpha_@{i} delta_@{i} theta_@{i} sigc_@{i} beta_@{i} sigh_@{i} csme_y_@{i} c_y_@{i} Isme_ysme_@{i} Ibf_ybf_@{i} ksmebar_@{i} kbfbar_@{i} esmebar_@{i} ebfbar_@{i} ysmebar_@{i} ybfbar_@{i} Wbar_@{i}
esme_ysme_@{i} ebf_ybf_@{i} G_y_@{i} rhog_@{i} phi_@{i} rhoa_@{i} Hbar_@{i} phi1_@{i} phi2_@{i} eps_@{i} Psmebar_@{i} Pbfbar_@{i} Pebar_@{i} rKbar_@{i} gammab_@{i} Ismebar_@{i} Ibfbar_@{i}
tb_@{i} nb_b_@{i} nb_ksme_@{i} ksme_nb_@{i} n_nb_@{i} nnb_nb_@{i} nb_nnb_@{i} n_nnb_@{i} cB_y_@{i} eta_@{i} sigma_@{i} rhoe_@{i} epsilon_@{i} b_@{i} Xi_@{i} vf_@{i} Qbfbar_@{i} Qsmebar_@{i} ;

@#endfor 

var z y_UM pi_UM v rpm pibar_UM ybar_UM ;          
parameters gamma bet0 bet1 bet2 tau1 tau2 sebar sbbar ;
varexo Serpm Seasme Seabf Seg See ; // the latter is shock to energy price ;

// calibration of exogenous parameters
 
@#for i in countries

alpha_@{i} = 0.33; // Share of contribution of capital and energy on GDP
delta_@{i} = 0.03; // Depreciation of capital 
theta_@{i} = 10.0; // Capital adjustment costs parameter 
sigc_@{i} = 0.75; // Intertemporal elasticity of substitution 
beta_@{i} = 0.99; // Discount factor
sigh_@{i} = 0.32; // Elasticity of labor disutility 
rhog_@{i} = 0.95; // Persitence of government spending
rhoa_@{i} = 0.97; // Persistence of technological shock 
gammaf_@{i} = 0.9831; // small-medium firms probability to survive
gammab_@{i} = 0.99; // bank probability to survive
tb_@{i} = 0.001; // part of capital trasferts to survival bank 
psi_@{i} = 0.025; // small-medium enterprises external financial premium elasticity
eta_@{i} = 1.1; // value that multilpies the value of marginal costs inside PC
sigma_@{i} = 6; // value of rigidity, i.e. cost of adjustment of price
b_@{i} = 0.045; //share of energy on production 
rhoe_@{i} = 0.95; // persistence of energy price shock process, calibrated as in Wei
epsilon_@{i} = 0.4; // CES production function of retailers parameter
vf_@{i} = -0.9; // CES capital/eneergy sobstitution parameter

@#endfor

gamma=0.8; // "importance" of other country motions to domestic economy
bet0 = 0.9;
bet1= 1.1; 
bet2 = 0; 
psib_1=0.002; // banks external financial premium elasticity country 1
psib_2=0.002; // banks external financial premium elasticity country 2
nb_b_1=0.10; // Banks inside capital/loans ratio country 1
nb_b_2=0.10; // Banks inside capital/loans ratio country 2
tau1=0.7; //share on retailer production of big firms input country 1
tau2=0.3; // share on retailer production of big firms input country 2 

//steady state  

@#for i in countries

rhosmebar_@{i} = 1/1.1;
rhobfbar_@{i} = 1/1.1 ;
G_y_@{i} = 0.16;
n_ksme_@{i}=0.4;
//nb_b_@{i}=0.2;
Qsmebar_@{i}=1;
Qbfbar_@{i}=1;
ksme_n_@{i}=1/n_ksme_@{i};
nb_ksme_@{i}=nb_b_@{i}*(1-n_ksme_@{i});
ksme_nb_@{i}=1/nb_ksme_@{i};
n_nb_@{i}=n_ksme_@{i}*ksme_nb_@{i};
nnb_nb_@{i}=1+n_nb_@{i};
nb_nnb_@{i}=1/nnb_nb_@{i};
n_nnb_@{i}=1-nb_nnb_@{i};
rbar_@{i} = 1/beta_@{i}; //it would be both return of household and big firm rate on loans 
rKbar_@{i}=rbar_@{i}+0.005; //Rate sme > Rate bf
ksme_ysme_@{i} = (alpha_@{i}*rhosmebar_@{i})/(rKbar_@{i}-(1-delta_@{i}));
kbf_ybf_@{i} = (alpha_@{i}*rhobfbar_@{i})/(rbar_@{i}-(1-delta_@{i}));
csme_y_@{i}=(1-gammaf_@{i})/gammaf_@{i}*n_ksme_@{i}*ksme_ysme_@{i};
cB_y_@{i}=(1-gammab_@{i})*(1-tb_@{i})/(gammab_@{i}*(1-tb_@{i})+tb_@{i})*nb_ksme_@{i}*ksme_y_@{i};
ysme_ksme_@{i}= 1/ksme_ysme_@{i};
ybf_kbf_@{i}= 1/kbf_ybf_@{i};
Isme_ysme_@{i} = delta_@{i}*ksme_ysme_@{i};
Ibf_ybf_@{i} = delta_@{i}*kbf_ybf_@{i};
c_y_@{i} = 1 - G_y_@{i} - Isme_ysme_@{i} - Ibf_ybf_@{i} - csme_y_@{i} - cB_y_@{i} ;
esme_ysme_@{i}=rhosmebar_@{i}*alpha_@{i}/Pebar_@{i};
ebf_ybf_@{i}=rhobfbar_@{i}*alpha_@{i}/Pebar_@{i};
Psmebar_@{i}=1/1.1 ;
Pbfbar_@{i}=1/1.1 ;
@#endfor
@#if i == countries [1] 
ybf_ysme_@{i}= tau1^(epsilon)/((1-tau1)^epsilon) ;
@#else
ybf_ysme_@{i+1}=tau2^(epsilon)/(1-tau2)^epsilon) ;
@#endif 




model (linear);

@#for i in countries
    rhosme_@{i}=Psme_@{i}; // use this in order to do not change the rhosme
    rhobf_@{i}=Pbf_@{i}; // use this in order to do not change the rhobf
    //input of sme demanded by retailers 
    ysme_@{i}=(-epsilon_@{i}*Psme_@{i})+y_@{i}+(epsilon_@{i}*MC_@{i});
    //input of bf demanded by retailers
    ybf_@{i}=(-epsilon_@{i}*Pbf_@{i})+y_@{i}+(epsilon_@{i}*MC_@{i});
    //production funct of wholesale producers: sme
    ysme_@{i}=asme_@{i}+(alpha_@{i}*(ksmebar_@{i}^vf_@{i})*b_@{i}*ksme_@{i}+alpha_@{i}*(1-b_@{i})*(esmebar_@{i}^vf_@{i})*esme_@{i})/(b_@{i}*(ksmebar_@{i}^vf_@{i})+(1-b_@{i})*(esmebar_@{i}^vf_@{i}))+Hhsme_@{i}*(1-alpha_@{i}) ;
    //production funct of wholesale producers: bf
    ybf_@{i}=abf_@{i}+(alpha_@{i}*(kbfbar_@{i}^vf_@{i})*b_@{i}*kbf_@{i}+alpha_@{i}*(1-b_@{i})*(ebfbar_@{i}^vf_@{i})*ebf_@{i})/(b_@{i}*(kbfbar_@{i}^vf_@{i})+(1-b_@{i})*(ebfbar_@{i}^vf_@{i}))+Hhbf_@{i}*(1-alpha_@{i}) ;
    //equation of equilibrium in labor market
    H_@{i}=(Hhsme_@{i}/Hbar_@{i})+(Hhbf_@{i}/Hbar_@{i});
    //Capital accumulation of sme
    ksme_@{i}=(1-delta_@{i})*ksme_@{i}(-1) + delta_@{i}*Isme_@{i};
    //Capital accumulation of bf
    kbf_@{i}=(1-delta_@{i})*kbf_@{i}(-1) + delta_@{i}*Ibf_@{i};
    //net worth of bank 
    nb_@{i}=(gammab_@{i}*(1-tb_@{i})+tb_@{i})*rKbar_@{i}*((1/nb_b_@{i}-1)*(rK_@{i}-r_@{i}(-1))+rbar_@{i}/rKbar_@{i}*r_@{i}(-1)+rbar_@{i}/rKbar_@{i}*nb_@{i}(-1)-(1/nb_b_@{i}-1)*sb_@{i}(-1));
    // external financial premium
    rK_@{i}(+1)=r_@{i}+psi_@{i}*(-n_nnb_@{i}*n_@{i}-nb_nnb_@{i}*nb_@{i}+Qsme_@{i}+ksme_@{i});
    rb_@{i}=r_@{i}+psib_@{i}*(-n_nb_@{i}*nb_b_@{i}*n_@{i}-nb_@{i}+ksme_nb_@{i}*nb_b_@{i}*(Qsme_@{i}+ksme_@{i}));
    se_@{i}=rK_@{i}(+1)-r_@{i}; //remind that this holds only of small-medium enterprises
    sb_@{i}=rb_@{i}-r_@{i}; //same of se
    //Investment of sme
    Qsme_@{i} = theta_@{i}*delta_@{i}*Isme_@{i} - theta_@{i}*delta_@{i}*ksme_@{i}(-1);
    //Investment of bf
    Qbf_@{i} = theta_@{i}*delta_@{i}*Ibf_@{i} - theta_@{i}*delta_@{i}*kbf_@{i}(-1);
    //aggregate investment
    I_@{i}=Ibf_@{i}+Isme_@{i};
    //price of wholesale good offered by sme
    Psme_@{i}=ysme_@{i}*((1/(vf_@{i}-1))*((vf_@{i}/alpha_@{i})-1)-((ysmebar_@{i}-(Wbar_@{i}/ysmebar_@{i}*(1-alpha_@{i}))^(-1))*(1-(((1-alpha_@{i})*Wbar_@{i})/(ysmebar_@{i}-alpha_@{i}*ysmebar_@{i})^2))))+(((ysmebar_@{i}^((vf_@{i}/alpha_@{i})-1))/alpha_@{i})^(1/(vf_@{i}-1)))*((1-b_@{i})^(1/(1-vf_@{i})))*(Pebar_@{i}^(vf_@{i}/(1-vf_@{i})))*(vf_@{i}/(vf_@{i}-1))*(Pe_@{i})/(Psmebar_@{i}*((ysmebar_@{i}-(Wbar_@{i}/(ysmebar_@{i}-alpha_@{i}*ysmebar_@{i})))))+((ysmebar_@{i}^((vf_@{i}/alpha_@{i})-1)/alpha_@{i})^(1/(1-vf_@{i})))*(b_@{i}^(1/(1-vf_@{i})))*(rKbar_@{i}^(vf_@{i}/(vf_@{i})-1))*(vf_@{i}/(vf_@{i}-1))*(rK_@{i})+(((ysmebar_@{i}^((vf_@{i}/(alpha_@{i})-1)))/alpha_@{i})^(1/(vf_@{i}-1)))*((Pebar_@{i}^(vf_@{i}/(vf_@{i}-1)))*((1-b_@{i})^(1/(1-vf_@{i})))+(rKbar_@{i}^(vf_@{i}/(1-vf_@{i})))*(b_@{i}^(1/(1-vf_@{i}))))*(-1/(ysmebar_@{i}-(alpha_@{i}*ysmebar_@{i})))*W_@{i}*Wbar_@{i};
    //price of wholesale good offered by bf
    Pbf_@{i}=ybf_@{i}*((1/(vf_@{i}-1))*((vf_@{i}/alpha_@{i})-1)-((ybfbar_@{i}-(Wbar_@{i}/ybfbar_@{i}*(1-alpha_@{i}))^(-1))*(1-(((1-alpha_@{i})*Wbar_@{i})/(ybfbar_@{i}-alpha_@{i}*ybfbar_@{i})^2))))+(((ybfbar_@{i}^((vf_@{i}/alpha_@{i})-1))/alpha_@{i})^(1/(vf_@{i}-1)))*((1-b_@{i})^(1/(1-vf_@{i})))*(Pebar_@{i}^(vf_@{i}/(1-vf_@{i})))*(vf_@{i}/(vf_@{i}-1))*(Pe_@{i})/(Pbfbar_@{i}*((ybfbar_@{i}-(Wbar_@{i}/(ybfbar_@{i}-alpha_@{i}*ybfbar_@{i})))))+((ybfbar_@{i}^((vf_@{i}/alpha_@{i})-1)/alpha_@{i})^(1/(1-vf_@{i})))*(b_@{i}^(1/(1-vf_@{i})))*(rbar_@{i}^(vf_@{i}/(vf_@{i})-1))*(vf_@{i}/(vf_@{i}-1))*(r_@{i})+(((ybfbar_@{i}^((vf_@{i}/(alpha_@{i})-1)))/alpha_@{i})^(1/(vf_@{i}-1)))*((Pebar_@{i}^(vf_@{i}/(vf_@{i}-1)))*((1-b_@{i})^(1/(1-vf_@{i})))+(rbar_@{i}^(vf_@{i}/(1-vf_@{i})))*(b_@{i}^(1/(1-vf_@{i}))))*(-1/(ybfbar_@{i}-(alpha_@{i}*ybfbar_@{i})))*W_@{i}*Wbar_@{i};
    //consumption of household
    c_@{i} = c_@{i}(+1)-sigc_@{i}*r_@{i};
    //consumption of sme // doesn't exist for bf as they don't declare bankaruptcy
    csme_@{i}=n_@{i}; 
    //consumption of bank
    cB_@{i}=nb_@{i};
    //labor supply faced by  both bf and sme
    H_@{i}=(-sigh_@{i}/sigc_@{i})*c_@{i}+(sigh_@{i}*W_@{i});
    //interest rate short term motion 
    r_@{i} = rpm - pi_@{i}(+1);
   
    //technological shock of sm
    asme_@{i} = rhoasme_@{i}*asme_@{i}(-1) - Seasme ;
    //technological shock of bf
    abf_@{i} = rhoabf_@{i}*abf_@{i}(-1) - Seabf;
    //shock of government spending
    G_@{i} = rhog_@{i}*G_@{i}(-1) + Seg ;
    // energy price shock
    Pe_@{i} = rhop_@{i}*Pe_@{i}(-1) + See ;
    @# endfor
  
    @#if i == countries [1]  // different equations between two countries
        @#define alt_co = countries [2]
        pi_@{i}=gamma*pi1_@{i}+(1-gamma)*pi1_@{alt_co} ; // value of inflation in first country
        c_@{i}=c_@{alt_co}+sigc_@{i}*v(-1) ; // aggregate consumption
        y_@{i} = c_y_@{i}*c_@{i} + c_y_@{i}*((1-gamma)*(1-sigc_@{i})+(1-gamma)/(2*gamma-1))*v(-1)+(Ibf_ybf_@{i}+Isme_ysme_@{i})*I_@{i} + G_y_@{i}*G_@{i} +csme_y_@{i}*csme_@{i}+cB_y_@{i}*cB_@{i}; //resource constraint-->to modify
        rhosme_@{i}+(1-gamma)*v+ysme_@{i}+Hhsme_@{i}=W_@{i} ;// labor demand by sme
        rhobf_@{i}+(1-gamma)*v+ybf_@{i}+Hhbf_@{i}=W_@{i} ; // labor demand by bf
        Pe_@{i}=rhosme_@{i}+(1-gamma)*v+ysme_@{i}-((b_@{i}*(ksmebar_@{i}^vf_@{i})+(1-b_@{i})*(esmebar_@{i}^vf_@{i}))^(-1))*b_@{i}*vf_@{i}*((ksmebar_@{i}^vf_@{i})*ksme_@{i})-(((b_@{i}*ksmebar_@{i}^(vf_@{i})+(1-b_@{i})*esmebar_@{i}^(vf_@{i}))^(-1))*(1-b_@{i})*(vf_@{i}-1)*(esmebar_@{i}^vf_@{i})+(vf_@{i}-1)*(1-b_@{i}))*esme_@{i}; //optimal condition of energy sme
        Pe_@{i}=rhobf_@{i}+(1-gamma)*v+ybf_@{i}-((b_@{i}*(kbfbar_@{i}^vf_@{i})+(1-b_@{i})*(ebfbar_@{i}^vf_@{i}))^(-1))*b_@{i}*vf_@{i}*((kbfbar_@{i}^vf_@{i})*kbf_@{i})-(((b_@{i}*kbfbar_@{i}^(vf_@{i})+(1-b_@{i})*ebfbar_@{i}^(vf_@{i}))^(-1))*(1-b_@{i})*vf_@{i}*ebfbar_@{i}^(vf_@{i}-1)+(vf_@{i}-1)*(1-b_@{i}))*ebf_@{i}; //optimal condition of energy bf
        rK_@{i}*rKbar_@{i}=v^(1-gamma)*ysmebar_@{i}/(b_@{i}*(ksmebar_@{i}^vf_@{i})+(1-b_@{i})*(esmebar_@{i}^vf_@{i}))*alpha_@{i}*b_@{i}*(ksmebar_@{i}^(vf_@{i}-1))*rhosme_@{i}*rhosmebar_@{i}+rhosmebar_@{i}*(ysmebar_@{i}/(b_@{i}*(ksmebar_@{i}^vf_@{i})+(1-b_@{i})*(esmebar_@{i}^vf_@{i})))*(1-gamma)*(v^(1-gamma))*alpha_@{i}*b_@{i}*(ksmebar_@{i}^(vf_@{i}-1))*v+rhosmebar_@{i}*(v^(1-gamma))*(b_@{i}*((ksmebar_@{i}^vf_@{i})+((1-b_@{i})*(esmebar_@{i}^(vf_@{i}))))^(-1))*alpha_@{i}*b_@{i}*(ksmebar_@{i}^(vf_@{i}-1))*ysme_@{i}*ysmebar_@{i}+ksme_@{i}*(rhosmebar_@{i}*(v^(1-gamma))*b_@{i}*ysmebar_@{i}*((1/(b_@{i}*(ksmebar_@{i}^vf_@{i})+(1-b_@{i})*(esmebar_@{i}^vf_@{i})))*(vf_@{i}-1)*(ksmebar_@{i}^(vf_@{i}-1))-((b_@{i}*(ksmebar_@{i}^vf_@{i})+(1-b_@{i})*(esmebar_@{i}^vf_@{i}))^(-2))*b_@{i}*vf_@{i}*(ksmebar_@{i}^(2*vf_@{i}-1)))-theta_@{i}*((Ismebar_@{i}/ksmebar_@{i})^2))+(1-alpha_@{i})*Qsme_@{i}*Qsmebar_@{i}-Qsme_@{i}(-1)*Qsmebar_@{i}; //foc capital of sme
        r_@{i}*rbar_@{i}=v^(1-gamma)*ybfbar_@{i}/(b_@{i}*(kbfbar_@{i}^vf_@{i})+(1-b_@{i})*(ebfbar_@{i}^vf_@{i}))*alpha_@{i}*b_@{i}*(kbfbar_@{i}^(vf_@{i}-1))*rhobf_@{i}*rhobfbar_@{i}+rhobfbar_@{i}*(ybfbar_@{i}/(b_@{i}*(kbfbar_@{i}^vf_@{i})+(1-b_@{i})*(ebfbar_@{i}^vf_@{i})))*(1-gamma)*(v^(1-gamma))*alpha_@{i}*b_@{i}*(kbfbar_@{i}^(vf_@{i}-1))*v+rhobfbar_@{i}*(v^(1-gamma))*(b_@{i}*((kbfbar_@{i}^vf_@{i})+((1-b_@{i})*(ebfbar_@{i}^(vf_@{i}))))^(-1))*alpha_@{i}*b_@{i}*(kbfbar_@{i}^(vf_@{i}-1))*ybf_@{i}*ybfbar_@{i}+kbf_@{i}*(rhobfbar_@{i}*(v^(1-gamma))*b_@{i}*ybfbar_@{i}*((1/(b_@{i}*(kbfbar_@{i}^vf_@{i})+(1-b_@{i})*(ebfbar_@{i}^vf_@{i})))*(vf_@{i}-1)*(kbfbar_@{i}^(vf_@{i}-1))-((b_@{i}*(kbfbar_@{i}^vf_@{i})+(1-b_@{i})*(ebfbar_@{i}^vf_@{i}))^(-2))*b_@{i}*vf_@{i}*(kbfbar_@{i}^(2*vf_@{i}-1)))-theta_@{i}*((Ibfbar_@{i}/kbfbar_@{i})^2))+(1-alpha_@{i})*Qbf_@{i}*Qbfbar_@{i}-Qbf_@{i}(-1)*Qbfbar_@{i}; //foc capital of bf
        y_@{i}=((tau1*ybfbar_@{i}^((epsilon_@{i}-1)/epsilon_@{i})+(1-tau1)*ysmebar_@{i}^((epsilon_@{i}-1)/epsilon_@{i}))^(1/(epsilon_@{i}-1))*(tau1*ybfbar_@{i}^((epsilon_@{i}-1)/epsilon_@{i})*ybf_@{i}+(1-tau1)*ysmebar_@{i}^((epsilon_@{i}-1)/epsilon_@{i})*ysme_@{i}))/ybar_@{i}; //retailer production funct country 1 (tau1)
        (epsilon_@{i}-1)*MC_@{i}=(1/((tau1^epsilon_@{i})*(Pbfbar_@{i}^(1-epsilon_@{i}))+((1-tau1)^epsilon_@{i})*(Psmebar_@{i}^(1-epsilon_@{i}))))*(((-tau1^epsilon_@{i})*(1-epsilon_@{i})*(Pbfbar_@{i}^(1-epsilon_@{i}))*Pbf_@{i})-((1-tau1)^epsilon_@{i})*(1-epsilon_@{i})*(Psmebar_@{i}^(1-epsilon_@{i}))*Psme_@{i}); //marginal cost country 1 (depending on different values of tau between two countries)
        pi1_@{i}=beta_@{i}*pi1_@{i}(+1)+eta_@{i}*MC_@{i}/sigma_@{i}; //Phillips curve country 1
        @#else
        @#define alt__co = countries [1]
        pi_@{i}=gamma*pi1_@{i}+(1-gamma)*pi1_@{alt__co} ; // value of inflation in second country
        c_@{i}=c_@{alt__co}+sigc_@{i}*v(-1) ; // aggregate consumption
         y_@{i} = c_y_@{i}*c_@{i} + c_y_@{i}*(gamma*(1-sigc_@{i})+gamma/(1-2*gamma)+sigc_@{i})*v(-1)+(Isme_ysme_@{i}+Ibf_ybf_@{i})*I_@{i} + G_y_@{i}*G_@{i} +csme_y_@{i}*csme_@{i}+cB_y_@{i}*cB_@{i};
        rhosme_@{i}+(gamma-1)*v+ysme_@{i}+Hhsme_@{i}=W_@{i}; //labor demand by sme
        rhobf_@{i}+(gamma-1)*v+ybf_@{i}+Hhbf_@{i}=W_@{i}; //labor demand by bf
        Pe_@{i}=rhosme_@{i}+(gamma-1)*v+ysme_@{i}-((b_@{i}*(ksme_@{i}^vf_@{i})+(1-b_@{i})*(esme_@{i}^vf_@{i}))^(-1))*b_@{i}*vf_@{i}*((ksmebar_@{i}^vf_@{i})*ksme_@{i})-(((b_@{i}*ksme_@{i}^(vf_@{i})+(1-b_@{i})*esmebar_@{i}^(vf_@{i}))^(-1))*(1-b_@{i})*vf_@{i}*esmebar_@{i}^vf_@{i}+(vf_@{i}-1)*(1-b_@{i}))*esme_@{i};//optimal condition of energy sme
        Pe_@{i}=rhobf_@{i}+(gamma-1)*v+ybf_@{i}-((b_@{i}*(kbf_@{i}^vf_@{i})+(1-b_@{i})*(ebf_@{i}^vf_@{i}))^(-1))*b_@{i}*vf_@{i}*((kbfbar_@{i}^vf_@{i})*kbf_@{i})-(((b_@{i}*kbf_@{i}^(vf_@{i})+(1-b_@{i})*ebfbar_@{i}^(vf_@{i}))^(-1))*(1-b_@{i})*vf_@{i}*ebfbar_@{i}^vf_@{i}+(vf_@{i}-1)*(1-b_@{i}))*ebf_@{i};//optimal condition of energy bf
        rK_@{i}*rKbar_@{i}=v^(gamma-1)*ysmebar_@{i}/(b_@{i}*(ksmebar_@{i}^vf_@{i})+(1-b_@{i})*(esmebar_@{i}^vf_@{i}))*alpha_@{i}*b_@{i}*(ksmebar_@{i}^(vf_@{i}-1))*rhosme_@{i}*rhosmebar_@{i}+rhosmebar_@{i}*(ysmebar_@{i}/(b_@{i}*(ksmebar_@{i}^vf_@{i})+(1-b_@{i})*(esmebar_@{i}^vf_@{i})))*(gamma-1)*(v^(1-gamma))*alpha_@{i}*b_@{i}*(ksmebar_@{i}^(vf_@{i}-1))*v+rhosmebar_@{i}*(v^(1-gamma))*(b_@{i}*((ksmebar_@{i}^vf_@{i})+((1-b_@{i})*(esmebar_@{i}^(vf_@{i}))))^(-1))*alpha_@{i}*b_@{i}*(ksmebar_@{i}^(vf_@{i}-1))*ysme_@{i}*ysmebar_@{i}+ksme_@{i}*(rhosmebar_@{i}*(v^(1-gamma))*b_@{i}*ysmebar_@{i}*((1/(b_@{i}*(ksmebar_@{i}^vf_@{i})+(1-b_@{i})*(esmebar_@{i}^vf_@{i})))*(vf_@{i}-1)*(ksmebar_@{i}^(vf_@{i}-1))-((b_@{i}*(ksmebar_@{i}^vf_@{i})+(1-b_@{i})*(esmebar_@{i}^vf_@{i}))^(-2))*b_@{i}*vf_@{i}*(ksmebar_@{i}^(2*vf_@{i}-1)))-theta_@{i}*((Ismebar_@{i}/ksmebar_@{i})^2))+(1-alpha_@{i})*Qsme_@{i}*Qsmebar_@{i}-Qsme_@{i}(-1)*Qsmebar_@{i}; //foc capital of sme country 2
        r_@{i}*rbar_@{i}=v^(gamma-1)*ybfbar_@{i}/(b_@{i}*(kbfbar_@{i}^vf_@{i})+(1-b_@{i})*(ebfbar_@{i}^vf_@{i}))*alpha_@{i}*b_@{i}*(kbfbar_@{i}^(vf_@{i}-1))*rhobf_@{i}*rhobfbar_@{i}+rhobfbar_@{i}*(ybfbar_@{i}/(b_@{i}*(kbfbar_@{i}^vf_@{i})+(1-b_@{i})*(ebfbar_@{i}^vf_@{i})))*(gamma-1)*(v^(1-gamma))*alpha_@{i}*b_@{i}*(kbfbar_@{i}^(vf_@{i}-1))*v+rhobfbar_@{i}*(v^(1-gamma))*(b_@{i}*((kbfbar_@{i}^vf_@{i})+((1-b_@{i})*(ebfbar_@{i}^(vf_@{i}))))^(-1))*alpha_@{i}*b_@{i}*(kbfbar_@{i}^(vf_@{i}-1))*ybf_@{i}*ybfbar_@{i}+kbf_@{i}*(rhobfbar_@{i}*(v^(1-gamma))*b_@{i}*ybfbar_@{i}*((1/(b_@{i}*(kbfbar_@{i}^vf_@{i})+(1-b_@{i})*(ebfbar_@{i}^vf_@{i})))*(vf_@{i}-1)*(kbfbar_@{i}^(vf_@{i}-1))-((b_@{i}*(kbfbar_@{i}^vf_@{i})+(1-b_@{i})*(ebfbar_@{i}^vf_@{i}))^(-2))*b_@{i}*vf_@{i}*(kbfbar_@{i}^(2*vf_@{i}-1)))-theta_@{i}*((Ibfbar_@{i}/kbfbar_@{i})^2))+(1-alpha_@{i})*Qbf_@{i}*Qbfbar_@{i}-Qbf_@{i}(-1)*Qbfbar_@{i}; //foc capital of bf country 2
        y_@{i}=((tau2*ybfbar_@{i}^((epsilon_@{i}-1)/epsilon_@{i})+(1-tau2)*ysmebar_@{i}^((epsilon_@{i}-1)/epsilon_@{i}))^(1/(epsilon_@{i}-1))*(tau2*ybfbar_@{i}^((epsilon_@{i}-1)/epsilon_@{i})*ybf_@{i}+(1-tau2)*ysmebar_@{i}^((epsilon_@{i}-1)/epsilon_@{i})*ysme_@{i}))/ybar_@{i}; //production funct of retailer country 2 (tau2);
        (epsilon_@{i}-1)*MC_@{i}=(1/((tau2^epsilon_@{i})*(Pbfbar_@{i}^(1-epsilon_@{i}))+((1-tau2)^epsilon_@{i})*(Psmebar_@{i}^(1-epsilon_@{i}))))*(((-tau2^epsilon_@{i})*(1-epsilon_@{i})*(Pbfbar_@{i}^(1-epsilon_@{i}))*Pbf_@{i})-((1-tau2)^epsilon_@{i})*(1-epsilon_@{i})*(Psmebar_@{i}^(1-epsilon_@{i}))*Psme_@{i}); //marginal cost country 2 (depending on different values of tau between two countries);
        pi1_@{i}=beta_@{i}*pi1_@{i}(+1)+eta_@{i}*MC_@{i}/sigma_@{i};  // Phillips curve country 2
        @#endif



  // Values of Monetary unit : inflation, output and relied value in steady state
    pi_UM=(pi_1+pi_2)/2; 
    y_UM=(y_1+y_2)/2;
    pibar_UM=(pi_1-pi_2)/2;
    ybar_UM=(y_1-y_2)/2; 
 // Values of rpm
    rpm= bet0*rpm(-1) + (1-bet0)*(bet1*pi_UM + bet2*y_UM) + Serpm;
z=v;
sebar=se_1-se_2;
sbbar=sb_1-sb_2;
end;

        
        shocks;
        var Serpm; stderr 1 //monetary shock ;
        //var Seg; stderr 1 //government spending shock ;
        //var Seasme; stderr 1 //technological shock for sme ;
        //var Seabf; stderr 1 //technological shock for bf ;
        //var See; stderr 1 //price of energy shock ;
        
        end;
        steady;
        check;
        stoch_simul (irf=20);

jpfeifer · April 25, 2024, 7:06am

You can’t have a

        @#define alt_co = countries [2]

in a loop. You may want to check out the attached PDF on how to do conditionals.
Ch_3_macroprocessor.pdf (893.6 KB)

Fra · April 25, 2024, 2:58pm

Ok thanks very much for helping me :).
Anyway, I’ve some other problems with this mod file since it’s very long. If you are available, could you check the file in order to find the errors? Obviously if you have free-time to spare :).
Thank you again!

Fra · April 25, 2024, 2:58pm

modelthesisFRA.mod (17.5 KB)

jpfeifer · April 25, 2024, 4:20pm

You have various wrong linearizations. Take

    Pbf_2=ybf_2*((1/(vf_2-1))*((vf_2/alpha_2)-1)-((ybfbar_2-(Wbar_2/ybfbar_2*(1-alpha_2))^(-1))*(1-(((1-alpha_2)*Wbar_2)/(ybfbar_2-alpha_2*ybfbar_2)^2))))+(((ybfbar_2^((vf_2/alpha_2)-1))/alpha_2)^(1/(vf_2-1)))*((1-b_2)^(1/(1-vf_2)))*(Pebar_2^(vf_2/(1-vf_2)))*(vf_2/(vf_2-1))*(Pe_2)/(Pbfbar_2*((ybfbar_2-(Wbar_2/(ybfbar_2-alpha_2*ybfbar_2)))))+((ybfbar_2^((vf_2/alpha_2)-1)/alpha_2)^(1/(1-vf_2)))*(b_2^(1/(1-vf_2)))*(rbar_2^(vf_2/(vf_2)-1))*(vf_2/(vf_2-1))*(r_2)+(((ybfbar_2^((vf_2/(alpha_2)-1)))/alpha_2)^(1/(vf_2-1)))*((Pebar_2^(vf_2/(vf_2-1)))*((1-b_2)^(1/(1-vf_2)))+(rbar_2^(vf_2/(1-vf_2)))*(b_2^(1/(1-vf_2))))*(-1/(ybfbar_2-(alpha_2*ybfbar_2)))*W_2*Wbar_2;

There seems to be an issue with the bracketing, resulting in a multiplication of variables.

Fra · April 26, 2024, 7:54am

Thank you
Where do you think there are bracketing errors?
Anyway, I’m trying to get linearizations again.

jpfeifer · April 26, 2024, 12:39pm

There is a large first bracket enclosing variables, and that whole bracket is multiplied with another bracket containing variables. That yields a nonlinearity. Maybe it’s just a wrong bracket or the whole linearization is wrong.