Replication: A DSGE Model with Cryptocurrency


I am trying to replicate “A New Economic Framework: A DSGE Model with Cryptocurrency” by Asimakopoulus, Lorusso and Ravazzolo (2019).

Setup (attached a one-page PDF with this information):

  • According to page 8 of the appendices there are 14 endogenous variables.
  • In page 15 of their paper they state 7 equilibrium equations, which are complemented with 6 shocks and 2 equilibrium equations (goods market and cryptocurrency clearing condition). This adds to 15 equations.

Comments and questions:

  • First, I understand there should be the same number of endogenous variables as equilibrium equations. Because of this, I substitute equation (23) into equation (22) and get rid of phi (which conveniently doesn’t happen to be listed as endogenous variable).
  • Second, I think I have 13 of the 14 questions correct. I am struggling to setup the cryptocurrency market clearing condition (and I think they don’t state this equilibrium condition explicitly). I know that cryptocurrency demand (mc) should be equal to cryptocurrency supply - but I am not sure on how to define this supply. In the meantime, I am equating cryptocurrency demand to the entrepreneurs productivity.
  • Third, I am getting the error “Blanchard & Kahn conditions are not satisfied: indeterminacy”.

If anyone can provide comments, particularly on how to obtain the crypto market condition and to solve the problem on the third point that would be truly appreciated.

Sincerely, any comment will be appreciated. Apologies if a dumb mistake was done, I am getting started into DSGE modelling.

Attached the mod file. Thanks. mchg.

Replication.pdf (332.8 KB)
Replication.mod (6.7 KB)