Dearall，Nowadays I’m replicating the paper BGG1999 based on nonlinear first order conditions,but always meet “BK conditions are not satisfied”. I guess it’s the timing problem of CSV first order condition,but I don’t know the exactly reason.Does anyone know the reason, or if anybody have a replication code of this article based on nonlinear first order conditions.Thanks a lot.

BGG_ver2.mod (5.8 KB)

runner.m (1.6 KB)

The file is not complete.

When I run `runner.m`

, the erro is:

Equation 10 has a residuals.

```
((Gammap-mu*Gp)/Gammap)*(1-Gamma)+(Gamma-mu*G)=1/S(-1); %Equ 10
```

This residual almost equal zero, I don’t know does it matter?

No, the tiny residuals do not matter. But you can use Dynare’s \LaTeX-capabilities to inspect the FOCs:

BGG_ver2.mod (5.8 KB)

BGG_ver2_TeX_binder.pdf (109.9 KB)

Thanks Professor jpfeifer,got it.Today I find when I reduce the NK-BGG model to RBC-BGG,there is still a problem of “BK condition not satisfied”. So the timing problem must be CSV. In the BGG_ver2.mod, to clarify the state contigent characteristic of the debt contract, I write the first order condition about CSV based on time t. Because omegabar(t+1) depends on realized Rk(t+1),but we do not define expected omegabar(t+1) ,so I move the time of the entire equation based on time t.Is this right?

Yes, that sounds consistent with Dynare’s timing convention.