Indetrminancy due to Rank failure

[adeem]

Hi,

I have copied dynare command output ( Matlab window). The rank condition is verified, however, dynare crashes due to indetermiancy. I have copied n pasted the mod file as well. Any suggestions shall be appreciated.

dynare mpolicy1
Warning: Could not get change notification handle for remote M:\4.1.2\matlab\distributions.
Windows has exhausted its pool of handles for this file server.
This server does not appear to support UNIX-style directory timestamp updates.
Type 'help changeNotification' for more info.
> In path at 110
In addpath at 87
In dynare_config at 40
In dynare at 80

Configuring Dynare ...
[mex] Generalized QZ.
[mex] Sylvester equation solution.
[mex] Kronecker products.
[mex] Sparse kronecker products.
[mex] Bytecode evaluation.
[mex] k-order perturbation solver.
[mex] k-order solution simulation.

Starting Dynare (version 4.1.2).
Starting preprocessing of the model file ...
Substitution of exo leads: added 3 auxiliary variables and equations.
Substitution of exo lags: added 1 auxiliary variables and equations.
Found 18 equation(s).
Evaluating expressions...done
Computing static model derivatives:
- order 1
Computing dynamic model derivatives:
- order 1
- order 2
Processing outputs ...done
Preprocessing completed.
Starting MATLAB/Octave computing.





Residual for equation number 1 is equal to -0.82
Residual for equation number 2 is equal to 0
Residual for equation number 3 is equal to 0
Residual for equation number 4 is equal to 0
Residual for equation number 5 is equal to 0
Residual for equation number 6 is equal to 0
Residual for equation number 7 is equal to 0
Residual for equation number 8 is equal to 0
Residual for equation number 9 is equal to 0
Residual for equation number 10 is equal to 0
Residual for equation number 11 is equal to -0.03
Residual for equation number 12 is equal to 0
Residual for equation number 13 is equal to 1
Residual for equation number 14 is equal to -0.2
Residual for equation number 15 is equal to 0
Residual for equation number 16 is equal to 0
Residual for equation number 17 is equal to 0
Residual for equation number 18 is equal to 0



EIGENVALUES:
Modulus Real Imaginary

0 -0 0
1.533e-017 -1.533e-017 0
1.516e-016 1.516e-016 0
2.308e-016 2.308e-016 0
3.963e-016 -3.963e-016 0
0.3 0.3 0
0.9 0.9 0
0.9838 0.9299 0.3211
0.9838 0.9299 -0.3211
1 -1 0
1 1 0
1.02 1.02 0
1.03 1.03 0
1.151 1.151 0
1.433 -1.433 0
2.969 2.969 0
9.237 9.237 0
Inf Inf 0
Inf -Inf 0
Inf -Inf 0
Inf -Inf 0


There are 10 eigenvalue(s) larger than 1 in modulus
for 10 forward-looking variable(s)

The rank conditions ISN'T verified!


STEADY-STATE RESULTS:

y -2.22045e-016
ystar 0
m -1.77636e-015
mstar 4.44089e-014
z -0.408163
ze -0.408163
zgap -0.408163
pi 1
r 2
rs 3
rhozstar 0
rhoqstar 0
q 0.510204
qe 0.510204
??? Error using ==> print_info at 45
Blanchard Kahn conditions are not satisfied: indeterminacy due to rank failure

Here is the mod file:

// Monetary Policy Analysis

var y ystar m mstar z ze zgap pi r rs rhozstar rhoqstar q qe ;
varexo e1 e2 e3 e4 e5 e6 e7 e8 rus pistar rstar zstar qstar ;
parameters alphald alphagap alphaz lamda betald betalag betargap betazgap deltaz deltaq gammalag gammam gammapi gammagap betam betaq rho rhom rhoy;
betald=0.1;
betalag=0.75;
betargap=0.075;
betazgap=0.025;
betam=0.08;
betaq=0.02;
alphald=0.3;
alphagap=0.6;
alphaz=0.2;
deltaz=0.25;
deltaq=0.25;
gammalag=0.75;
gammam=0.2;
gammapi=0.5;
gammagap=0.3;
rho=0.9;
rhom=1.02;
rhoy=1.03;
//rhopi=0.9;
//lamda=0.01;

model;
y-ystar=(betald*(y(+1)-ystar(+1)))+(betalag*(y(-1)-ystar(-1)))-(betargap*(r(-1)-rstar(-1)))+(betazgap*zgap(-1))+(betam*m(-1))+(betaq*q(-1))+e1;
pi=(alphald*pi(+1))+((1-alphald)*pi(-1))+(alphagap*(y(-1)-ystar(-1)))+(alphaz*(z-z(-1)))+e2;
z=ze(+1)-(r-rus-rhozstar)+e3;
ze=(deltaz*z(+1))+((1-deltaz)*z(-1));
rhozstar=zstar-zstar(+1)+rstar-rus;
rhoqstar=qstar-qstar(+1)+rstar-rus;
q=qe(+1)-(r-rus-rhoqstar)+e5;
qe=(deltaq*q(+1))+((1-deltaq)*q(-1));
//r=(q-qe)+(lamda*ygap)+rhoqstar;
rs=(gammalag*rs(-1))+((1-gammalag)*(rstar+pi+(gammapi*(pi(+1)-pistar(+1))))+(gammagap*(y-ystar)))+(gammam*(m-mstar))+e4;
r=rs-pi(+1);
//rgap=r(-1)-rstar(-1);
ystar=rhoy*ystar(-1);
zgap=z-zstar;
//mgap=m-mstar;
m=rho*m(-1)+e6;
mstar=rhom*mstar(-1);
//pistar=rhopi*pistar(-1);
end;

initval;
//ygap=0;
y=1;
ystar=1;
//mgap=0;
//rgap=0;
zgap=0;
pi=1;
z=0;
ze=0;
zstar=0;
r=2;
rs=3;
rus=2;
rhozstar=0;
rhoqstar=0;
pistar=1;
rstar=2;
m=10;
mstar=10;
q=1;
qe=1;
qstar=1;
e1=0;
e2=0;
e3=0;
e4=0;
e5=0;
e6=0;
end;

resid(1);
check;

steady;
shocks;
//var rus;
//periods 10;
//values 3;
var e1; stderr 0.0104;
var e6; stderr 0.0104;
//var e2; stderr 0.0015;
corr e1,e6 = 0.9;
end;


stoch_simul(periods=2100);


Regards,

Adeem

[SébastienVillemot]

The order condition is verified, but the rank condition isn't.

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