Hello!
I'm trying to solve the attached model but I have a unit root issue.
The model is a very standard 2-country open economy endowment model (shocks are specified as news shocks).
The model works fine in the version of complete markets and financial autarky (see attached files, respectively "newsCM" and "newsFA").
The problem is with the bond economy (since it introduces a forward-looking variable the BK conditions are not satisfied anymore).
Does anyone know how to deal with this please?
Many thanks in advance!
RT
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Unit root issue
by rteconomics » Wed Jan 04, 2012 11:34 am
- Attachments
-
newscm.txt- Complete markets
- (3.59 KiB) Downloaded 127 times
-
- newsfa.txt
- Financial autarky
- (3.54 KiB) Downloaded 90 times
-
- newsbe.txt
- Bond Economy
- (3.77 KiB) Downloaded 107 times
- rteconomics
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Re: Unit root issue
by rteconomics » Fri Jan 06, 2012 4:56 pm
Hi guys!
Sorry to bother again.. Any idea on this issue please?
Thanks,
R.
Sorry to bother again.. Any idea on this issue please?
Thanks,
R.
- rteconomics
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Re: Unit root issue
by MelleMa » Thu Jan 12, 2012 9:47 am
Hi!
Have you read Schmitt-Grohe and Uribe (2003) "Closing small open economy models"? The answer is there.
Have you read Schmitt-Grohe and Uribe (2003) "Closing small open economy models"? The answer is there.
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Re: Unit root issue
by jpfeifer » Thu Jan 12, 2012 2:04 pm
No, the answer won't be there as SGU deals with small open economies and the initial post explicitly states that it is a two-country model. Are you sure you obeyed Dynare's timing convention for predetermined states, i.e. the bonds? See the manual.
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Re: Unit root issue
by rteconomics » Thu Jan 19, 2012 4:44 pm
Actually, the code is well specified. In fact it works in the other versions (complete markets and financial autarky).
Not sure why it doesn't in a bond economy..
Not sure why it doesn't in a bond economy..
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Re: Unit root issue
by reubenpjacob » Thu Jan 26, 2012 10:38 am
Hi, the unit root problem is present in any bond economy (incomplete markets), irrespective of whether it is an SOE or a 2C model. did you try using a cost function for bond accumulation or an endogenous discount factor?
reuben
reuben
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