Search and matching model with Calvo wages

Hello everyone,

I am trying to replicate a search and matching model used in the following working paper. After rewriting the equations recursively to eliminate infinite summations I wrote the model in Dynare and used the same parameters used in the Paper. The code runs, but the rank condition is not satisfied, in fact the results of the model are somewhat counterintuitive.

I have been trying for hours to figure out where the problem might be, but have not been able to make any headway. I tried different parameterizations and initial stady state values, but unfortunately it did not work.

I would be vrably grateful for any help.
Thank you
search_calvo.mod (2.2 KB)

The rank condition error usually indicates that there is still a timing mistake.