Comparing 2 identical models of which only one works, why?

[beanbag]

I posted a topic a few days ago about not being able to introduce bonds to my model, a problem which is now resolved.
I succeeded in replicating the model in chapter 2 of gali's book on inflation and the business cycle.

I posted 2 models here that are basically identical, but only one of them works, the bottom one.
Why is that ?

the only thing I do is adding equations for the price and nominal wage logdeviations from steady state. The model is basically the same.

Has that something to do with the fact that they are nominal values ?



thanks for the insights!


ps: the models:

Code: Select all

alpha = 2/3;
phi = 2;
sigma = 3;
rho = 0.05;    // discount rate
theta = 1.5;   // taylor rule intensity


Code: Select all

model (linear);
i = rho + theta*infl;
a = 0.95 * a(-1) + e;
y = c;
y = a + (1-alpha)*n;
realwage = a - alpha*n;
realwage = sigma*c + phi*n;
c = c(+1) - 1/sigma * (i - infl(+1) - rho);

realwage = w - p;
infl = p - p(-1);
end;


Code: Select all

model (linear);
i = rho + theta*infl;
a = 0.95 * a(-1) + e;
y = c;
y = a + (1-alpha)*n;
realwage = a - alpha*n;
realwage = sigma*c + phi*n;
c = c(+1) - 1/sigma * (i - infl(+1) - rho);
end;


[p.gelain]

What do you mean with "the model does not work"? Which kind of error do you get?

Paolo