Hi, we want to solve the appendix model, but we have a problem.
the error of dynare is Blanchard Kahn conditions are not satisfied: no stable equilibrium,
Please advise us about how we can solve this problem.
thanks for your attentions
Best regards
Shima
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var c D K u Y o n w g M x lnp lnR lnz lnm lnt;
%t is a labor supply shock (?);
varexo ep eR ez em et;
parameters rhop, rhoR, rhoz, rhom, rhot, sigp, sigR, sigz, sigm, sigt, betta, gamma, eppi, chi, a, deltad, delta, nuu, alpha, zetta1, zetta2, tuun, tuuc, omega, b1, b2;
%chi is the Frisch elasticity of labor supply.
rhop=0.9; rhoR=0.9; rhoz=0.9; rhom=0.9; rhot=0.9;
sigp=0.1; sigR=0.1; sigz=0.1; sigm=0.1; sigt=0.1;
betta=0.99; gamma=0.7; eppi=0.4; chi=0.2; a=0.8;
deltad=0.025; delta=0.025; nuu=4; alpha=0.7; zetta1=0.5; zetta2=0.25;
tuun=0.1; tuuc=0.1; omega=0.6; b1=0.5; b2=0.5;
model;
n^chi=(((x+a*g)^(-eppi))*gamma*x*(1-tuun)*w)/(exp(lnt)*(1-tuuc)*c);
((x+a*g)^(-eppi))*gamma*x*(((b1/D(-1))*((D/D(-1))-1)+1)*(1/((1-tuuc)*c))-(1/D))=(1/((1-tuuc)*c(+1)))*betta*((x(+1)+a*g(+1))^(-eppi))*gamma*x(+1)*((1-deltad)+b1*((D(+1)/D)-1)*(D(+1)/D^2));
x=(c^gamma)*(D^(1-gamma));
w=(1-alpha)*(Y/n);
delta*(u^(nuu-1))=zetta1*exp(lnp)*(1-omega)*((u*K(-1))^(zetta1-1))*(M(-1)^zetta2);
b2*(1/K(-1))*((K/K(-1))-1)=exp(lnp(+1))*(1-omega)*zetta1*((u(+1)*K)^(zetta1-1))*(M^zetta2)*u(+1)-1+(1-delta*(u(+1)^nuu))+b2*((K(+1)/K)-1)*(K(+1)/K^2);
Y=exp(lnz)*((omega*o)^alpha)*n^(1-alpha);
o=((u*K(-1))^zetta1)*(M(-1)^zetta2);
g=(tuun*w*n)+(exp(lnp)*(1-omega)*o)-(tuuc*c)-K+((1-delta*(u^nuu))*K(-1))-(b2/2)*((K/K(-1))-1)^2;
M=M(-1)-o+exp(lnm);
((1-tuuc)*c)+D=((1-tuun)*(w*n))+exp(lnR)+((1-deltad)*D(-1))-(b1/2)*(((D/D(-1))-1)^2);
lnp=rhop*lnp(-1)+ep;
lnz=rhoz*lnz(-1)+ez;
lnR=rhoR*lnR(-1)+eR;
lnm=rhom*lnm(-1)+em;
lnt=rhot*lnt(-1)+et;
end;
initval;
M=2; K=1; u=1; n=0.3; D=0.5; o=1.1892; Y=0.5502; w=0.5502; c=1.262; x=.956; g=.3409;
end;
shocks;
var ep; stderr sigp;
var ez; stderr sigz;
var eR; stderr sigR;
var em; stderr sigm;
var et; stderr sigt;
end;
check;
steady;
stoch_simul(periods=2200, order=1);