I am a master’s student who is new to open economy DSGE. I have encountered some problems in solving the steady state problem. The steady state cannot converge. I also found that the department settings of the stablecoin issuer are a bit redundant, but I don’t know how to change them. Deleting equations will cause the number of variables to be inconsistent with the number of equations. My Dynare code is attached.
design_cbdc_steadystate.m (9.6 KB)
design_cbdc.mod (6.6 KB)
You need to investigate the equations with residuals and then check the steady state computations affecting them. Something curious is that even the Taylor rules show residuals, suggesting issues with the setting of parameters.
Thank you for your answer! I was able to solve the steady state after a series of adjustments, but there is still an error, the BK condition is not satisfied, there are 22 equations with 23 variables, I looked at the relevant variables, I guess there is a problem with the nominal exchange rate (NER), but I don’t know how to solve the problem.
design_cbdc_steadystate.m (10.6 KB)
design_cbdc.mod (6.7 KB)
It is hard to tell. But it’s most likely timing error. For example, the timing of capital in
RK = alpha*MC*A*K^(alpha-1)*N^(1-alpha);
W = (1-alpha)*MC*A*K^alpha*N^(-alpha);
RKf = alphaf*MCf*Af*Kf^(alphaf-1)*Nf^(1-alphaf);
Wf = (1-alphaf)*MCf*Af*Kf^alphaf*Nf^(-alphaf);
look inconsistent with e.g. the law of motion.