Stackelberg DSGE Model – Large Eigenvalues and Stability Concerns

General DSGE Modeling Replication Attempts
1

Hello, I am working on the replication of the paper Evaluation of Stackelberg Leader-Follower Interaction Between Policymakers in Small-Scale Open Economies, specifically the leadership of monetary policy. Unfortunately, when I run the code, the IRF shows very large oscillations and I suspect this is a steady state and eigenvalue problem. I checked all the equations and parameters according to the paper, but the problem still does not fix it. Please help me, what can I do? This problem has cost me a lot of time, unfortunately. I am also uploading the paper and the code.
Thanks in advance for your help!
vida,+5_Tetik.pdf (1.4 MB)

gov.mod (3.1 KB)

2

Please help me. I’m in a hurry for my master’s thesis and this problem has wasted a lot of time.

3
  1. Your linearization is incorrect. Your last two equations contain constant terms that are not accounted for in the other equations. As a consequence, your steady state is wrong.
  2. Once you fix that, your model is unstable. It’s typically a problem with the timing or another mistake in the model. Sometimes, it’s a problem with parameter values.
    gov.mod (3.1 KB)
4

Thanks for the answer, I just directly copied the existing equations and parameter values ​​that are given in the paper itself. I also wrote to the author, but I did not receive any feedback. I will definitely take your advice into account, but I don’t know if it will work out for me, unfortunately.