no stable equilibrium
Posted: Mon Jun 20, 2016 12:17 amDear 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
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