Hi,
I am trying to solve Gali and Monacelli (2005)'s small open economy model using Dynare (see the attached .mod file). However, Dynare says that the Blanchard-Kahn conditions are not satisfied (6 eigenvalues larger than 1 in modulus for 7 forward-looking variables).
What worries me is that, the calibration and equations I use are identical to the ones given in Monacelli's own Gauss code (irnew3.prg) which is given on his website. I have run his code and it works fine. He uses the Anderson-Moore algorithm to solve the system.
http://www.igier.uni-bocconi.it/whos.ph ... id_doc=177
Could you please help me understand why the same equations work in the Gauss code but not in Dynare?
Could anybody share a working version of a Dynare code for a small open economy model similar to Gali and Monacelli?
Greg68