Dynare forums

I have rewritten log-linearized small open economy model of Linardi (2016) into Dynare 4.6 and I've got the error suggesting that Blanchard-Kahn conditions are not satisfied (identerminacy, 6 forward-looking variables, 5 eigenvalues greater than 1). I checked that (to my knowledge) I've rewritten equations correctly. Parameters were calibrated to their prior means by Linardi (2016) or usual values used in literature (Taylor rule coefficients). I attach the paper and my code.


Thanks in advance for your advice.

That is hard to tell. Usually, there is a timing error somewhere. The challenge is finding out whether the problem is in the paper or in your implemented model equations.

So I will look deeper in Kam (2009) paper and possible other implementations of this model. Thanks.