BK conditions & Capital Adjustment Costs
Posted: Wed Oct 12, 2011 2:17 pmHi:
I am working with an open economy RBC model that has capital adjustments, which have been added to deal with the issue of indeterminacy. However for some values values (approx > 4) no stable solution can be found, and at lower values the problem of indeterminacy shows up. Does this mean that there is a solution to be had somewhere between say 3.8 and 4?
I know this issue has been dealt with ad nauseam but i would appreciate your opinion. Thanks for your time
I am working with an open economy RBC model that has capital adjustments, which have been added to deal with the issue of indeterminacy. However for some values values (approx > 4) no stable solution can be found, and at lower values the problem of indeterminacy shows up. Does this mean that there is a solution to be had somewhere between say 3.8 and 4?
I know this issue has been dealt with ad nauseam but i would appreciate your opinion. Thanks for your time