Hi Everyone…

I have two questions related with small open economy models for emerging countries.

1–I´m trying to calibrate and simulate the small open economy model with internal debt elastic rate that is proposed in the 2001 paper by Martin Uribe et al (Closing small open economy models) but i’ve had convergence problems. In fact i can find the steady state, but when i check the rank condition i can,t achive it. I´m worried about it because i use the same parameters that the author uses in the paper, so i don´t understand if the problem is due to the code that i use…or anything else…i attach the code and the messages of error, i will appreciate anyone who tellme whats wrong

CODE

var y c iv k h la d risk tb ca a;

varexo ua;

parameters alf del g w phi psi rbar dbar rhoa;

alf = 0.32;

del = 0.1;

g = 2;

w = 1.455;

phi = 0.028;

psi = 0.11135/150;

rbar = 0.04;

dbar = 0.74421765717098;

rhoa = 0.42;

model;

risk = psi*[exp(d-dbar)-1];

tb = (1+rbar+risk)*d(-1)]-d;
ca = tb-(rbar+risk(-1)) d(-1);
tb = y-c-iv-(phi/2)(k(+1)-k)^2];
y = exp(a)*(k^alf)

*(h^(1-alf));*

iv = k(+1)-(1-del)

la(1+rbar) = la(+1)

iv = k(+1)-(1-del)

*k];*

la = [c-((h^w)/w)]^(-g);

h = (-1)(k/h)^alf]^(1/(1-w));la = [c-((h^w)/w)]^(-g);

h = (-1)

*exp(a)*(1-alf)la

*[1+rbar+risk+(d*psi

*exp(d-dbar))];*

la(1+phi*(k(+1)-k))

la

*(1+rbar)=la(+1)*(exp(a(+1))

*alf*(h(+1)/k(+1))^(1-alf)+(1-del)+phi*(k(+2)-k(+1)));

a = rhoa*a(-1)+ua;

end;

initval;

d = dbar;

risk = 0;

tb = rbar*dbar;
ca = 0;
h = 0.5;
k = 3;
y = (k^alf)*(h^(1-alf));

iv = del*k;

c = y-tb-iv;

la = [c-((h^w)/w)]^(-g);

a = 0;

end;

steady;

check;

STEADY-STATE RESULTS:

a -5.46636e-026

c 0.522427

ca 2.77557e-017

d 0.404521

h 0.473103

iv 0.159562

k 1.59562

la 40.5327

risk -0.000213802

tb 0.0160944

y 0.698083

EIGENVALUES:

Modulus Real Imaginary

```
8.359e-021 -8.359e-021 0
0.1233 -0.1233 0
0.7 0.7 0
0.9971 0.9971 0
1.041 1.041 0
8.456 -8.456 0
Inf Inf 0
Inf Inf 0
```

There are 4 eigenvalue(s) larger than 1 in modulus

for 5 forward-looking variable(s)

The rank condition ISN’T verified!

2–can you tellme where i can find some examples, codes and extended papers related to small open economy models with special emphasis in emerging markets like colombia, that use dynare as the main tool for solving these models?? i’ve been searching the net and i found everything except these models…

thanks for your help

Sergio