RBC Model with Heterogenous Agents

1

Hello! I am a beginner at Dynare and I need all the help I can get.
I built a simple RBC model with a fraction of the households ricardian and the others non-ricardian. I was able to analytically solve the steady state values and since I know the parameters, I was able to derive numerical values for them as well. However, Dynare is unable to find the steady state and thus the impulse response functions for my model and I am not sure as to whats exactly wrong since I believe I have derived the right equations and initial values.
I need this for my thesis and in desperate help.

Thanks in advance!

heterogenous.mod (3.8 KB)

2

You did not set all parameters. theta_g and theta_b are missing.

3

Hi
Thanks a lot! I fixed that but now I am running into the dreaded “the rank condition ISN’T verified!”

Again much help needed.
heterogenous.mod (3.8 KB)

4

Hi, if I’m not wrong, bonds are predetermined. Try to change B with B(-1) in line 83 (definition of tax) and it should work.

5

Hi hlt25,

Thanks for the suggestion. I tried that but it still isn’t working. It used to say there are “3 eigenvalue(s) larger than 1 in modulus for 1 forward-looking variable(s)” but it now says “2 eigenvalue(s) larger than 1 in modulus for 1 forward-looking variable(s)”.

Do I need to let dynare know B(nominal bonds are predetermined?) Can anyone point me to a paper or Dynare codes with a simple RBC MODEL that has heterogenous agents?

Much thanks!!

6

Hello,

Model is able to run now but my impulse response functions look squiggly(zig zaggy).

Anyone has an idea as to why that is happening and how I can fix it ?

Thanks

heterogenous.mod (3.8 KB)

7

Check your fiscal rules. My hunch is there is a sign error somewhere, making taxes oscillate.

8

Hi, what is your formula？