Small 2-country model - problem with the 2nd order approxima


We have a small 2-country open economy model, which we need to solve with the 2nd order approximation (see the files attached). The 1st order approximation works just fine (it seems), but the 2nd order one does not accomplish. Any suggestion on what’s going on?

Thanks in advance for any hint.

simple_steadystate.m (1.8 KB)
simple.mod (2.43 KB)

Could you specify what the problem is?
Note that for second order approximations, you might need to enable pruning to get finite simulated moments:


Thanks. The problem was indeed to get finite simulated moments with the 2nd order approximation. Actually it was not as simple as you suggested:

does NOT work (Dynare v. 4.1.3). But we took the hint and followed the instructions in:

[Pruning, Explosive IRFs with second order approximation)

It appears to work now. Thanks again.

Sorry, but if you use the current Dynare snapshot (which I did), pruning is already implemented.