Dynare forums

Dear all
I am following the paper of Dhawan and Jeske (2008) " Energy Price Shocks and the Macroeconomy The Role of Consumer Durables"
and adding the subsidy policy from the paper of Bouakez ,Rebei and Vencatachellum (2008) "Optimal oil price pass through in an economy with rigidity ".

Above is my code files, after i run it on Dynare 4.3.2 , it comes some error:

Code: Select all

var N D E_h  W H  R  Z K E_f Y I_D I_K P_E P_H tau P_Ef P_Eh G r pi ;


varexo var_Z var_P var_G;

parameters
KoIK   delta_K   DoID   delta_D   alpha   KoX   E_foX   gamma   NoD   DoA   E_hoA   
rho   Hss   tauss   Rss   beta   phi   NoY   I_DoY   I_KOY   GoY   rho_p   
rho_Z   WHoY   RKoY   E_foY   E_hoY   chi_f   chi_h rho_G
;
KoIK   =   64.11039342   ;
delta_K   =   0.0156   ;
DoID   =   14.67088608   ;
delta_D   =   0.0788   ;
alpha   =   0.36   ;
KoX   =   0.864115446   ;
E_foX   =   0.135884554   ;
gamma   =   0.8032   ;
NoD   =   0.48336497   ;
DoA   =   0.701892907   ;
E_hoA   =   0.298107093   ;
rho   =   -2.8748   ;
Hss   =   0.3   ;
tauss   =   0.148   ;
Rss   =   0.03016   ;
beta   =   0.99   ;
phi   =   -0.7   ;
NoY   =   0.56022   ;
I_DoY   =   0.0790438   ;
I_KOY   =   0.1703208   ;
GoY   =   0.1   ;
rho_p   =   0.9753   ;
rho_Z   =   0.95   ;
WHoY   =   0.64   ;
RKoY   =   0.32928688   ;
E_foY   =   0.05178   ;
E_hoY   =   0.0387   ;
chi_f   =   0.5   ;
chi_h   =   0.5   ;
rho_G   =   0.95   ;




model (linear);
//1.capital accumulate 
I_K=KoIK*K-(1-delta_K)*KoIK*K(-1);

//2.durable accumulate 
I_D=DoID*D-(1-delta_D)*DoID*D(-1);

//3.production function
Y= Z + (alpha)*(KoX*K(-1)+E_foX*E_f)+(1-alpha)*H;

//4.durable good
0=beta*(1-gamma)/gamma*NoD*DoA*(N+(rho-1)*D- (DoA*rho*D+ E_hoA*rho*E_h(+1)))+beta*(1-delta_D)*(N-N(+1));

//5.energy consumption 
(rho-1)*E_h+N-P_Eh+P_H =    DoA*rho*D(-1)+E_hoA*rho*E_h;   
 
//6.hour work
N+P_H=W- Hss/(1-Hss)*H-tauss/(1-tauss)*tau;

//7.capital input
-N=-N(+1)+beta*Rss*(1-tauss)*(R(+1)-P_H(+1)-tauss/(1-tauss)*tau(+1));

//10.firm energy use
P_Ef=P_H+Y-   (KoX*phi*K(-1)+E_foX*phi*E_f)   +(phi-1)*E_f;

//11.wage ok
W+H=Y+P_H;

//12.real inrerest rate 
R=P_H+Y-   (KoX*phi*K(-1)+E_foX*phi*E_f)  +(phi-1)*K(-1);

//13.resource constraint 
Y=NoY*N  +  I_DoY*I_D  +  I_KOY*I_K  + GoY *G +(P_E+E_h-P_H)  +  (P_E+E_f-P_H);

//14.energy price shock 
P_E=rho_p*P_E(-1)+var_P;

//16.technology shock
Z=rho_Z*Z(-1)+var_Z;   

//20.home good price 
P_H+Y=WHoY*(W+H)+RKoY*(R+K(-1))+E_foY*(P_Ef+E_f);

//21. firm energy price
P_Ef=(1-chi_f)*P_Ef(-1)+chi_f*P_E;

//22. hh energy price
P_Eh=(1-chi_h)*P_Eh(-1)+chi_h*P_E;

//23. goverment budget
tauss*WHoY*(tau+W+H)+tauss*RKoY*(tau+R+K(-1))=(1-chi_f)*(P_E-P_Ef(-1))+(1-chi_h)*(P_E-P_Eh(-1))+GoY*G;

//24. government spending shock
G=rho_G*G(-1)+var_G;

//25
r=R-P_H;

//26.pi
pi=P_H-P_H(-1);
end;                                                                   

initval;
N   =   0   ;
D   =   0   ;
E_h   =   0   ;
W   =   0   ;
H   =   0   ;
R   =   0   ;
Z   =   0   ;
K   =   0   ;
E_f   =   0   ;
Y   =   0   ;
I_D   =   0   ;
I_K   =   0   ;
P_E   =   0   ;
P_H   =   0   ;
tau   =   0   ;
P_Ef   =   0   ;
P_Eh   =   0   ;
G   =   0   ;
r = 0;
pi = 0;
end;

resid;

shocks;
//technology shock
var var_Z; stderr 1;
//internation energy shock
var var_P; stderr 1;
//government
var var_G; stderr 1;
end;
steady;

check;
stoch_simul(periods=2000,irf=40); dynasave('mmex1.mat');

The error from dynare says that :

There are 4 eigenvalue(s) larger than 1 in modulus
for 5 forward-looking variable(s)

The rank conditions ISN'T verified!

??? Error using ==> print_info at 43
Blanchard Kahn conditions are not satisfied: indeterminacy

Error in ==> stoch_simul at 81
print_info(info, options_.noprint);

Error in ==> JB_2008with_subsidy at 289
info = stoch_simul(var_list_);

Error in ==> dynare at 120
evalin('base',fname) ;

I really can't find out where the problem is, i have already checked the predetermined variables ( K D ),
It will be grateful if anyone could solve the problem for me. Because it is part of my thesis, really makes important to me.

In advance, Thanks for your kind attention.

Hank