Same old question here, I am trying to simulate a small open economy model.The model is based on Christiano notes, I am attaching the pdfs with these notes. I use debt elastic interest rate to close the model, I checked the timing and have run model diagnostic but it keep saying that:
There are 6 eigenvalue(s) larger than 1 in modulus
for 5 forward-looking variable(s)
The rank condition ISN’T verified!
Error using print_info (line 42)
Blanchard Kahn conditions are not satisfied: no stable equilibrium
My main concern here is that the problem seem to arise from the external debt/bond variable, which I call “af”
Checking the timing of that variable my understanding is that the current account equation of the model (line 107 ) should be,
af1+gamma*(pm1)^(1-aa)c1=RER1px1*X1+(1+raf1(-1))*af1(-1);
however, the model does not run, if I change the timing to…(line 108)
af1(1)+gamma*(pm1)^(1-aa)c1=RER1px1*X1+(1+raf1)*af1;
the model runs, however, the dynamics of hours (h1) seems wrong as an increase in monetary policy rate (contractionary shock) increases the working hours.
Both of those facts leads me into thinking that the timing in line 108 is wrong
if anyone has any thoughts I would appreciate it
openeconomy.pdf (457.5 KB) solvess2b.m (574 Bytes) twocountrymodel002c.mod (4.5 KB)