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.