Two sector model

Dear all,

I am trying to model a two-sector economy (durable and non durable sector) similar to the model in the paper of Barsky et al. (Sticky-price models and durable goods (2007) ) but with only labour in the production function. I have a one sector model with only the non durable goods which works fine, but I have trouble when I try to model the two sector economy. The error message I get is: Blanchard & Kahn conditions are not satisfied: no stable equilibrium.
Ive checked the timing, but I’m not sure whether something else is wrong. I would appreciate it if somebody could help me.
Below are the mod files of my model.

Thank you very much in advance.
David

NK_nondurable.mod (2.5 KB) NK_twosector.mod (4.4 KB)

What did Model_diagnostics say?

No obvious problems with this mod-file were detected.
So I don’t know what the problem might be.

Hello, your NK_twosector.mod file presents something strange. mu is denoted as parameter but its value is not initialized. Then, in the steady_state model block you denote mu with an expression. You may check this issue to see whether it works. Best, FgB

I would try to model a two-sector real economy first. Generally, use a model as simple as possible.