We try to replicate the model in Benigno, 2009. “Price Stability with imperfect financial integration”. This is a two-country model with two bonds and quadratic portfolio adjustment costs. We get the following error messages:
"There are 14 eigenvalue(s) larger than 1 in modulus
for 13 forward-looking variable(s)
The rank condition ISN’T verified!"
“Error using print_info (line 42)
Blanchard Kahn conditions are not satisfied: no stable equilibrium”
The model_diagnostic command does not give us a collinearity error message.
We’re also quite sure that timing is not the issue.
While the parameterization for the most part follows Benigno (2009), playing around with the monetary policy parameters can give us 13 eigenvalues larger than 1 for the 13 forward-looking variables, but the rank condition is still not verified.
We would be very happy if someone could hint us in the right direction here.
replication_benigno_st_steadystate.m (5.23 KB)
replication_benigno_st.mod (10.1 KB)