Timing of capital in two sector economy

Stochastic simulations
22

Dear @jpfeifer ,

Jumping back on this. Just to be clear, given that :
K = (1+g+n+gn)(K_f+K_repair);
Should production functions of the two firm include capital in the CES function with a lead K_f(t+1) ? Or should I keep K_f in the production function of f?

Thanks

23

Typically not. They use the current value for capital.

24

Before being able to talk about the allocation of human capital, one would need to explore the assertion embedded in your question that the financial sector is less productive than other sectors of the economy. The finance sector manages the flow of financial capital (money) between individuals, businesses, and governments, and plays a central role in the modern economy.

25

Hi, Prof Pfeifer.

I also use capital Z in two-agent model, and Z can freely divided Z_R and Z_K
between the two-agent.

But when I run the mod file, the Dynare 5.1 report:

There are 6 eigenvalue(s) larger than 1 in modulus 
for 7 forward-looking variable(s)

The rank condition ISN'T verified!
...
Error using print_info
Blanchard & Kahn conditions are not satisfied: indeterminacy.

MODEL_DIAGNOSTICS:  No obvious problems with this mod-file were detected.

I check the timing of capital K and Z. I think the timing is right in production function and first order function. I also simplified the model with respentative households, the file run. But in the Tank model, the file report error.
I donā€™t know where is wrong. I send file to you by PM.

26

I also donā€™t know what is going on. Sometimes the issues is a fundamental one in the sense that the split of capital between the two sectors cannot be uniquely determined.

27

Dear professor, I meet the same problem of the splitting of capital between the two sectors, I correct the time of K, but it reports:

Blanchard & Kahn conditions are not satisfied: indeterminacy.

Please help me check if there are any other errors or if my model cannot uniquely determine the solution

model_onecap.mod (6.1 KB)

28

What are you trying to model with

S  = K*( a_inv*((Inv) / (K) )^(1-eta) +  b_inv )+ K*(1-deltak);
K = S(-1);

?

30

it is the capital accumulation like ā€œA Macroeconomic Model with
Financial Panicsā€. Capital at the end of period is the sum of newly produced capital and the amount of capital left after production. The capital stock entering the next period K_{t+1} is S_t.

31

Can you try to implement the standard Dynare timing without using the auxiliary variable S?

32

Yes I did. But there is still the question of time.
model1.mod (6.4 KB)

33

The timing looks correct to me. Capital available for production inherited from the previous period can be freely split between the two sectors. I am at a loss what the problem is. Are you sure the rest of the setup cannot be the problem?