I am trying to write a simple model using Dynare. The model is a two sector, closed economy model with a Kinked Demand curve. See attached.
After running the model, I obtain theoretical moments of NaN for several variables. Upon checking I find that there is one eigenvalue of one. Thus, my model has a unit root.
My problem is that I cannot find the unit root. Perhaps, I have been staring at this too long. I would appreciate any help with the diagnostics of this model and any tips for resolving it.
Kinked Demand.mod (2.25 KB)