Using more than one stationary inducing property?

General DSGE Modeling
1

Hi again,
I would like to ask a question about inducing stationarity to the model. According to Schmitt-Grohe, there are alternative ways to induce stationarity to open economies: debt-elastic interest rate, endogenous discount rate or portfolio adjustment case. I am wondering if it is possible to use both an alternative in a model? That is, can I set up a model where there exist portfolio adjustment costs and debt-elastic interest rate? Would I encounter any problem?

Thank you very much

2

In the log-linear model, using portfoliio costs or the debt-elastic interest rate should get you the same UIP condition. So not sure using both would be very useful. You will have two parameters to control, instead of one, to get the same effect.
In the non-linear model, the portfolio costs would enter your goods market clearing condition, though.

Reuben

3

There is a priori no reason you cannot combine both. You need to convince your readers that it makes sense.