Dear Everyone:

```
We have two country models, could we have a model with two firms with different producion function?
```

I tried, but there are problems of “empty state space model”:

var y_h y_f c_h c_f k_h k_f i_h i_f l_h l_f w r z_h z_f;

varexo e_h e_f;

parameters beta psi delta alpha_h alpha_f rho_h rho_f;

alpha_h = 0.33;

alpha_f = 0.53;

beta = 0.99;

delta = 0.023;

psi = 1.75;

rho_h = 0.95;

rho_f = 0.98;

model;

1/c_h = beta*(1/c_h(+1))*(1+r(+1)-delta);
1/c_f = beta*(1/c_h(+1))

*(1+r(+1)-delta);*

psic_h/(1-l_h) = w;

psi

psi

*c_f/(1-l_f) = w;*

c_h+ k_h-(1-delta)

w=y_f(1-alpha_f)/l_f; // f.wage, perfect competition

c_h+ k_h-(1-delta)

*k_h(-1)= y_h;*

c_f+ k_f-(1-delta)

r=y_halpha_h/(k_h(-1));c_f+ k_f-(1-delta)

*k_f(-1) = y_f;*

y_h = (k_h(-1)^alpha_h)(exp(z_h)y_h = (k_h(-1)^alpha_h)

*l_h)^(1-alpha_h); // h: production*

y_f = (k_f(-1)^alpha_f)(exp(z_f)y_f = (k_f(-1)^alpha_f)

*l_f)^(1-alpha_f); // f: production*

w=y_h(1-alpha_h)/l_h; // h. wage, perfect competitionw=y_h

r=y_h

w=y_f

r=y_f*alpha_f/(k_f(-1));

//i_h = k_h-(1-delta)

*k_h(-1);*

//i_f = k_f-(1-delta)

z_f = rho_fz_f(-1)+e_f;

//i_f = k_f-(1-delta)

*k_f(-1);*

//y=y_h+y_f;

//l=l_h+l_f;

//k=k_h+k_f;

//i =i_h+i_f;

z_h = rho_hz_h(-1)+e_h;//y=y_h+y_f;

//l=l_h+l_f;

//k=k_h+k_f;

//i =i_h+i_f;

z_h = rho_h

z_f = rho_f

end;

initval;

k_h = 8;

k_f = 8;

//k = 16;

c_h = 0.76;

c_f = 0.76;

l_h = 0.3;

l_f = 0.3;

//l = 0.6;

w = 2.07;

r = 0.03;

z_h = 0;

z_f = 0;

e_h = 0;

e_f = 0;

end;

steady;

check;

shocks;

var e_h = 0.1;

end;

stoch_simul(irf=40,periods=2100);

```
Your help is highly appreciated!
```

Best,

Yi