Dear Dynare users,
I’m stuck with an indeterminacy problem for a small open economy model.
As a matter of fact, I am not quite sure where the problem lies and would appreciate your help here.
The model features complete asset markets, Rotemberg price adjustment costs and a fiscal policy shock.
Best,
Philipp
Check the timing in every equation, in particular the forward-looking ones.
If that does not work, strip down the model to an easier working version. For example, use flexible prices to see if the problem comes from price setting.
Dear Johannes,
thanks alot for your prompt answer, as always very helpful.
I have set the foreign economy as exogenous and obtained a working model. Another way to fix the problem was to specify foreign inflation as exogenous rather than foreign output.
Best,
Philipp