Dear contributors & moderators,
I would be interested in knowing whether you have found a solution to the instability issue arising from a two-country monetary union framework. I have the same issue as discussed in several posts
That is when I build a monetary union framework with common monetary policy, I have 9 eigenvalues larger than 1 and 10 forward-looking variables, i.e, one eigenvalue less than what is needed for stability. It seems that several of us came across this issue, but I do not see any solution on the forum.
Have you found a solution to get as many eigenvalues larger than one as forward looking variables when in a monetary union framework?
All the best,
Hugo