Replacing ricardian household's budget constraints with non-ricardian household budget constraints in the model's equilibrium equations gives wrong results

[jpfeifer]

It’s not about budget constraints, but about market clearing. See e.g.

Market Clearing Conditions

I have a simple question. For example, when we have 2 types of households such as savers and borrowers, we end up with 2 different budget constraints. At the end of the model, we sum the budget constraints and impose market-clearing conditions. It generally gives us a typical resource constraint. However, when we take the equations to Dynare, we exclude some of the market-clearing conditions and one of the budget constraints. To illustrate: [image] why do we exclude the household budget cons…

In the end, it depends on your model setup.