Dear Dynare-Community,

I am trying to replicate a simplified version of the “Anzoategui et al. (2019): Endogenous Technology Adoption and R&D as Sources of BC Persistence”-model. Therefore, I tried to get rid of all the complicating usual NK-DSGE features like price rigidities or investment adjustment costs etc…

I calculate the steady-states analytically in a separate file.

When I try to solve the model, I get the typical problem of violated BK-conditions:

There are 5 eigenvalue(s) larger than 1 in modulus

for 4 forward-looking variable(s)

The rank condition ISN’T verified!

When I run model_diagnostics, I don’t get any error messages.

I know that typically these issues are raised due to a timing error, but I tried to check that.

I tried to do a sensitivity analysis by setting prior distributions for the parameters and I got the message that:

0.0% of the prior support gives unique saddle-path solution.

and

For 100.0% of the prior support dynare could not find a solution.

I am not sure whether I did the simplification correctly. What I did was to set marginal costs of final goods producers as decreasing in (detrended) adopted technologies/varieties and just used the FOCs of the HH sector w.r.t. skilled and unskilled labor to pin down the respective labor supplies.

Maybe someone could have a look at my .mod-file and my model equations, and could tell me whether it is most likely a timing thing, something regarding my model simplifications or maybe something completely different. Thanks a lot in advance!

Anzoategui_2017_Simple.mod (7.8 KB)

Anzoategui_2017_Simple_steadystate.m (4.1 KB)

Kind regards