Two sector RBC model - the generalized Schur (QZ) decomposition failed

Stochastic simulations
1

Hi all,

I am working on a two-sector RBC model with monopolistic competition. I’ve solved for the steady state analytically using a steady_state_model block, and this seems fine. However, I then get the generalized Schur (QZ) decomposition failed error.

Can anyone point out where I may have gone wrong?

Thanks in advance,
Aditya

rbc_monop_2sector.mod (2.8 KB)

3

I think you are missing an equation. model_diagnostics suggests that

% Production technology
ya = exp(z)*(ka^alpha)*ha^(1-alpha);
yb = exp(z)*(kb^alpha)*hb^(1-alpha);

% Factor input choices
w = ya*mc*(1-alpha)/ha;
w = yb*mc*(1-alpha)/hb;
r = ya*mc*alpha/ka;
r = yb*mc*alpha/kb;

together already imply

% Marginal Cost
mc = (1/exp(z))*(r^(alpha))*((alpha)^(-alpha))*(w^(1-alpha))*((1-alpha)^(alpha-1));
4

Thanks! I will look at this further