Two-country and two-sector model is failed to find a solution to the linear system

Perfect foresight simulations
21

I used 1 period. In that case, the dimensions of the static and the dynamic Jacobian are the same: 54. The rank is 52. For the static Jacobian I get a rank of 54. With three periods, the size is 162 and the dynamic Jacobian has rank 160.

In contrast, for the model with investment adjustment costs, I get all Jacobians to be full rank, which squares well with the solution.

22

Hello Sir, just a question, what is your method to evaluate the Jacobian here. I have quite a similar issue but can’t replicate the method on my file. Thanks.

23

It’s a bit complicated. Can you share the mod-file?