Hi all
I have build a basic two country NK model with local currency pricing and adjustment costs. However, the model does not run and I cannot figure out what is the issue. I am getting a collinearity problem between a bunch of equations and I don't really understand what is causing it. I don't think any of these equations should be collinear. I am wondering if I have a timing problem. I also have two unit root eigenvalues. I would appreciate any help.
Thank you
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2 Country New Keynesian Model Help
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2 Country New Keynesian Model Help
by sp1589 » Fri Jul 31, 2015 3:33 am
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Re: 2 Country New Keynesian Model Help
by jpfeifer » Thu Aug 06, 2015 10:42 am
The collinearity warning comes from the two unit roots in your model. You need to understand where they come from.
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