Dear forum,
I have written a small open economy code with bond market included. It is assumed that there's incomplete asset market so that the rest of world is not allowed to hold domestic bonds (so no international risk sharing). According to Schmitt-Grohe & Uribe (2002), I include portfolio adjustment costs to ensure there's stable equilibrium (theoretically). However, I still cannot produce the output with stable equilibrium. I am sure the timing is correct. Can somebody help me? It is driving me crazy.
Please see the attachment. Thank you so much in advance.
Best,
Xinyi
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no stable equilibrium
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no stable equilibrium
by dianezhao » Mon Jun 20, 2016 12:17 am
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Re: no stable equilibrium
by jpfeifer » Fri Jun 24, 2016 4:20 pm
My guess is that the bond timing is wrong. Bonds are typically predetermined variables
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