Urgent help: Blanchard-kahn conidtions not satisfied in SOE

Dear all,

I keep getting the error that the Blanchard Kahn conditions are not satisfied. I have been reading the numerous forum posts on the Blanchard-kahn conditions, but have not found a solution to my code. Would need help to see what’s wrong with my code.

Basically, I’m trying to extend the basic Iacoviello (2005) model to that of a small open economy (SOE) model. To have a tractable model, I have incorporated elements of McCallum and Nelson (1999), where imports are used as inputs for the final output. In this case, entrepreneurs will use real estate, labour from households and imports as inputs to produce intermediate goods.

I have followed Iacoviello’s (2005) derivation closely, and have derived the steady-state ratios and log-linearised the various equations after incorporating elements required for a SOE model.

I’m working on this as part of my Master’s thesis, and would hope to be able to solve this problem as I’m stuck on this for quite awhile.

Attached is my .mod file. I have labelled the variables and equations.

iac_mcn2.mod (6.25 KB)

Thanks a lot!

Jerome