I am trying to replicate Kitano and Takaku’s “Capital Controls and Monetary Policy in a Small Open Economy”, in particular the pegged exchange rate case without financial accelerator and capital controls. I use the equations they indicate in the paper (plus equation 31 as it seems they mention 21 equations for 22 variables) and their parametrization, but I get both collinearity issues and the Blanchard-Kahn conditions not being satisfied.
I attach the steady-state and mod files, as well as the paper for reference, any help would be very appreciated!
kitanotakaku.mod (2.8 KB)
kitanotakaku_steadystate.m (1003 Bytes)
Kitanu Takaku - Capital Controls and Monetary Policy in a Small Open Economy.pdf (239.2 KB)
I quickly checked your codes, and when you put
before the model_diagnostics command you will see that one of your steady state equations doesn’t solve to “zero”.
Equation number 18 : -3.4123e-06
which means either the steady state or the model equations are wrong. Most probably this won’t solve your singularity issue but at least you know the model is correct after you’ve found the small mistake. I hope I could help a little bit.
Thanks for pointing it out, that was sloppy coding on my side. Exports are exogenous in the model and their steady-state value is determined by equation 18. I previously just defined EX as a parameter and forgot to change its value manually. Here attached you can find the updated version of the code where I defined EX as a variable and fixed to its steady-state value.
kitanotakaku.mod (2.9 KB)
kitanotakaku_steadystate.m (1.0 KB)