B-K conditions are not satisfied

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B-K conditions are not satisfied

Postby mtnttk » Wed Apr 26, 2017 2:34 pm

Hello,

I faced a problem when run a DSGE model with dynare, the error is "Blanchard Kahn conditions are not satisfied: indeterminacy".
Can anybody help me to find out what's the problem that i missed? I'll very appreciate about that. Thank you.

Attachment is my code and the error message that dynare shows:

Error in stoch_simul (line 98)
print_info(info, options_.noprint, options_);

Error in coop_nash_thesis (line 304)
info = stoch_simul(var_list_);

Error in dynare (line 180)
evalin('base',fname) ;

model_diagnostic: the Jacobian of the static model is singular
there is 1 colinear relationships between the variables and the equations
Colinear variables:
y
b
g
Colinear equations
1 4 5 7 10 11

The presence of a singularity problem typically indicates that there is one
redundant equation entered in the model block, while another non-redundant equation
is missing. The problem often derives from Walras Law.
Attachments
aa.mod
(2.24 KiB) Downloaded 66 times
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Re: B-K conditions are not satisfied

Postby hlt215 » Wed Apr 26, 2017 2:50 pm

The problem is not with Dynare, but with the model's equations. As the message says, although you have the number of variables that equals the number of uknowns, it seems you have entered one equations which should not be there and missign another equation that instead should be there. So, you need to find out what not useful equation you need to substitute.

Someone else might explain it better ;)
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Re: B-K conditions are not satisfied

Postby jpfeifer » Wed Apr 26, 2017 5:10 pm

Are you sure your fiscal sector uniquely determines the level of debt? Or is any value of debt feasible?
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Re: B-K conditions are not satisfied

Postby mtnttk » Fri Apr 28, 2017 12:42 pm

Thank you for your replies. I will check and turn..
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Re: B-K conditions are not satisfied

Postby mtnttk » Tue May 09, 2017 4:06 pm

jpfeifer wrote:Are you sure your fiscal sector uniquely determines the level of debt? Or is any value of debt feasible?


hlt215 wrote:The problem is not with Dynare, but with the model's equations. As the message says, although you have the number of variables that equals the number of uknowns, it seems you have entered one equations which should not be there and missign another equation that instead should be there. So, you need to find out what not useful equation you need to substitute.

Someone else might explain it better ;)

I understand the main reason for the problem. probably, I have resolved the system of equations incorrectly. This time I encounter a different problem when I solve the model again. I will be very pleased if you are interested.

The error I get is as follows;

Error using print_info (line 48)
Blanchard Kahn conditions are not satisfied: indeterminacy due to rank
failure

Error in stoch_simul (line 98)
print_info(info, options_.noprint, options_);

Error in coop_nash_thesis (line 394)
info = stoch_simul(var_list_);

Error in dynare (line 180)
evalin('base',fname) ;

the mod file as follows:

thank in advance.
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Re: B-K conditions are not satisfied

Postby jpfeifer » Tue May 09, 2017 6:47 pm

The file is missing.
------------
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University of Cologne
https://sites.google.com/site/pfeiferecon/
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Re: B-K conditions are not satisfied

Postby mtnttk » Wed May 10, 2017 7:04 am

jpfeifer wrote:The file is missing.

I added it again. Thanks..
Attachments
aac.mod
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Re: B-K conditions are not satisfied

Postby jpfeifer » Wed May 10, 2017 1:56 pm

Your model is still wrong. The unstable version will tell you
Code: Select all
ERROR: If the model is declared linear the second derivatives must be equal to zero.
       The following equations had non-zero second derivatives:
       * Eq # 3

because e.g. b*g is not linear
------------
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https://sites.google.com/site/pfeiferecon/
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Re: B-K conditions are not satisfied

Postby mtnttk » Wed May 10, 2017 2:41 pm

jpfeifer wrote:Your model is still wrong. The unstable version will tell you
Code: Select all
ERROR: If the model is declared linear the second derivatives must be equal to zero.
       The following equations had non-zero second derivatives:
       * Eq # 3

because e.g. b*g is not linear


I might have made a parenthesis mistake. However, Could it be a mistake? Or I get it wrong. Because the other model has the same equation and it works. I send both of them in attach. Thank you very much for your interest.
Attachments
aac.mod
(2.72 KiB) Downloaded 57 times
aa (2).mod
(2.4 KiB) Downloaded 55 times
mtnttk
 
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Re: B-K conditions are not satisfied

Postby mtnttk » Thu May 11, 2017 1:02 pm

I also could not understand what you mean in
jpfeifer wrote: because e.g. b*g is not linear
, If you mean B, B is a parameter. The error I have now is;

Error using print_info (line 42)
Blanchard Kahn conditions are not satisfied: no stable equilibrium

Error in stoch_simul (line 98)
print_info(info, options_.noprint, options_);

Error in coop_nash_thesis (line 394)
info = stoch_simul(var_list_);

Error in dynare (line 180)
evalin('base',fname) ;

thanks.
mtnttk
 
Posts: 11
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Re: B-K conditions are not satisfied

Postby jpfeifer » Fri May 12, 2017 6:32 am

You seem to have a timing problem in your model. Are you for example sure that the timing of
Code: Select all
b

is correct?
------------
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University of Cologne
https://sites.google.com/site/pfeiferecon/
jpfeifer
 
Posts: 6940
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Location: Cologne, Germany

Re: B-K conditions are not satisfied

Postby mtnttk » Fri May 12, 2017 12:32 pm

jpfeifer wrote:You seem to have a timing problem in your model. Are you for example sure that the timing of
Code: Select all
b

is correct?


I think i sure it, also, I added that file named aa and if you check this you will see that do not any errors. And, it also have same b in this file. However, I will recheck and come back.

Thanks a lot.
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Re: B-K conditions are not satisfied

Postby jpfeifer » Sun May 14, 2017 10:31 am

The BK conditions are about the interplay between the number predetermined variables and stable eigenvalues. Your timing of variables in the two files you posted are not immediately obvious. There is only one correct timing, but one can always get the model to run by fudging around with the timing. Thus, I wanted you to make sure that in both files the timing is really correct. b looked like a predetermined variable that may not have been treated that way.
------------
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University of Cologne
https://sites.google.com/site/pfeiferecon/
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Re: B-K conditions are not satisfied

Postby cgg_user » Tue May 16, 2017 2:33 pm

Hi all,

I add public sector to Iacoviello (2005). I consider a fiscal rule that ensures the stability of government debt. I managed to solve the model when consumption, capital and labor taxes are used as instruments (the others are held constant at the steady state) but I get that B-K are not satisfied when government expenditure adjust to stabilize debt. I check the timing and the equations and everything looks correct. Any help will be appreciated!
Attachments
iacoviello_i.mod
(7.83 KiB) Downloaded 52 times
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Re: B-K conditions are not satisfied

Postby jpfeifer » Thu May 18, 2017 11:28 am

You need to find out whether it is a matter of calibration/of the rule specification. In particular, i) what is the nonlinear form of the rule and did you correctly linearize it and ii) is there a simpler rule (e.g. only reacting to past debt) that works? Are you sure the signs of the coefficients are correctly specified? Note that too large a feedback can make a model explode, because the government may have too big a surplus.
------------
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University of Cologne
https://sites.google.com/site/pfeiferecon/
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