Basic NK DSGE Model Help, Please

[afelfel]

Hello all,

I am an undergraduate economics student attempting to replicate a basic NK DSGE model with an added link between the government spending shock and technology shock. My model includes a simple monetary policy rule consisting of a constant growth rate for the money supply instead of an interest rate rule. I am trying to demonstrate the effects of seignorage financing of government investment.

I am unable to get the model attached to work. I would really appreciate it if anyone is able to help me with correcting the attached code.

Thanks very much for viewing my query.

Best regards,

A. Fathalla

[jpfeifer]

You are simply missing one equation. You as the model builder need to find out what you are missing.

[afelfel]

Thank you.

So I have tried adding the money demand equation in terms of consumption and how real balances in relation to inflation and money growth. Nevertheless, I am getting the error message:

Impossible to find the steady state. Either the model doesn't have a steady state, there are an
infinity of steady states, or the guess values are too far from the solution

Thanks.

[jpfeifer]

You need to sort out the constant terms. If you have

Code: Select all

r_ss=(rho-sigma*(1-rho_a)*(1+phi)*a+sigma*(1-rho_g)*phi*g)/(sigma+phi);

then

Code: Select all

r_ss=rho/(sigma+phi);

which seems inconsistent with the other equations.