I extended a model, calibrated it and solved it with Dynare. The Blanchard Kahn conditions are satisfied, but I have 2 conjugated complex eigenvalues.
I have a problem understanding how this is possible. If X(t) = lambda * X(t-1) where lambda is the matrix where the eigenvalues are on the diagonal, how can I still have the variable in X(t) which is related to the complex eigenvalue since I am multiplying its lag by a complex eigenvalue?
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Re: Complex eigenvalues
by jpfeifer » Fri Apr 14, 2017 9:55 am
Please have a look at Villemot (2011): Solving rational expectations models at first order: what Dynare does. The eigenvalues reported are generalized eigenvalues resulting from the generalized Schur/QZ decomposition. They do not need to be real.
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Re: Complex eigenvalues
by GAK » Sat Apr 15, 2017 2:30 pm
Indeed, I was confusing the matrix that included the eigenvalues with the policy function.
Thank you for your answer.
Thank you for your answer.
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