I have a small open economy model which works fine when the monetary policy rule is specified. I have solved analytically for the steady state and everything should be ok (See the working model attached).
Now I would like to derive the Ramsey optimal policy, however I run into the following error:
Blanchard Kahn conditions are not satisfied: no stable equilibrium
My guess is that this has to do with the initial conditions I give to the model, however I am a bit lost on how to proceed. Any help or comment is greatly appreciated.
Best,
Philipp
