I am trying to write a RBC model where wages are not flexible, but follow a predetermined path: w(t)=(1+g)*w(t-1), where g is the rate of growth of the economy.
I already solved successfully the flexible wage version of the model on dynare, but now, when I substitute the first order condition for employment of the household with the predetermined path for wages I receive a message that it is impossible to find the steady state. Reference for the model is Shimer 2012 “wage rigidities and jobless recoveries”.
I enclose the .mod file, hoping that someone might find the time to take a look at it.
I thank you all in advance,
rigid_w.mod (1.33 KB)