indeterminacy due to rank failure

[lm280299]

I use Dynare 4.3.2. Here is what the program tells me.

There are 8 eigenvalue(s) larger than 1 in modulus
for 8 forward-looking variable(s)

The rank conditions ISN'T verified!

??? Error using ==> print_info at 46
Blanchard Kahn conditions are not satisfied: indeterminacy due to rank failure

I'm curious to know what is wrong in the model. I hope someone could help me.

Thank you!

[jpfeifer]

Run model_diagnostics. There are two issues here:

MODEL_DIAGNOSTICS: The following endogenous variables aren't present at the current period in the model:
taok

MODEL_DIAGNOSTICS: The Jacobian of the static model is singular
MODEL_DIAGNOSTICS: there is 1 colinear relationships between the variables and the equations
Colinear variables:
psi
theta
miu
xsi
AUX_ENDO_LEAD_145
Colinear equations
18 22

MODEL_DIAGNOSTICS: The presence of a singularity problem typically indicates that there is one
MODEL_DIAGNOSTICS: redundant equation entered in the model block, while another non-redundant equation
MODEL_DIAGNOSTICS: is missing. The problem often derives from Walras Law.

[lm280299]

Thank you! However, I still don't understand the first argument. What does it mean that "taok is not present at the current period in the model." Would you please help me explain that?

[jpfeifer]

It means that taok only shows up with a lag or lead, but never with contemporaneous timing. Looking at your code, it seem the equation

Code: Select all

rtilde(-1) = (1-taok(-1))*alpha*k(-1)^(alpha-1);


violates Dynare's timing convention. The equation is purely predetermined. This does not make sense.