THE RANK CONDITION PROBLEM for MONETARY UNION
Posted: Sun Aug 10, 2014 12:53 pmHello,
I have two country model which run perfectly with independent monetary policies, but when im trying to run the model with a single monetary policy in order to have a monetary union(the taylor rule contains the weighted average of output and inflation of both countries), the following message appears:
[i][i]There are 19 eigenvalue(s) larger than 1 in modulus
for 20 forward-looking variable(s)
The rank conditions ISN'T verified![/i][/i]
Someone can help me please, because i got stuck now? Here the mod file;
I have two country model which run perfectly with independent monetary policies, but when im trying to run the model with a single monetary policy in order to have a monetary union(the taylor rule contains the weighted average of output and inflation of both countries), the following message appears:
[i][i]There are 19 eigenvalue(s) larger than 1 in modulus
for 20 forward-looking variable(s)
The rank conditions ISN'T verified![/i][/i]
Someone can help me please, because i got stuck now? Here the mod file;