Failure to introduce bonds to my model

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Failure to introduce bonds to my model

Postby beanbag » Wed Mar 24, 2010 1:21 pm

I'm a master student economics fooling around with dynare, trying out calibrated simulations.
I can get simulations running in a bondless capital / labour economy with little to no problems.

But as soon as I try to introduce bonds of some sort or another, I fail in doing so.
Monetary economics is not my strongest to say the least.

I think the problem must lie somewhere in the solvency condition for bonds or the interest rate rule.


This is the model I'm talking about:
- logaritmic utility in consumption and leisure (relative weight of leisure is gamma).
- Perfect competition on goods and labour market,
- no capital.
- time preference beta.
- fixed technology (which I will shock when the model works)

Code: Select all
A = a;                                                       // technology = base value
Y = A*L^(1-alpha);                                     // production function
Y = C;                                                       // goods market clearing
W = P*A*(1-alpha)*L^(-alpha);                    // firms optimization
1 / C / P = gamma / (1-L) / W;                 // consumption leisure trade off
1 / C = 1 / C(+1) * (1+i(+1)) * beta;           // consumption euler
B = (1+i)*B(-1) + W*L - P*C;                       // consumer budget constraint
i = (1/beta - 1) + phi * ((P(+1) - P) / P;        // some sort of taylor rule





any help would be appreciated !
Thanks!
Kind regards
beanbag
 
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Joined: Mon Mar 22, 2010 11:09 pm

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