Dynare forums

Hi,
I'm estimating a DSGE model using Dynare. When I use "steady; check;" command, I find that there is tow eigenvalues equal to 1 and -1. Does that mean the endogenous variables are unit root? How to find that variable? What should I deal with it? Is there any consequence if there is a unit root variable in the model?

here is my mod file based on Medina, J. P. and C. Soto Model for The Chilean economy


Thank you,

Yes, that means there are unit roots. To find them, you can look at the IRFs with a long horizon. The variables that do not return to 0 have a unit root.
Whether that is problematic depends on whether the unit roots are an economic feature of the model or due to a bug in your mod-file. If it is the former, there is no reason to worry. You just have to keep in mind that you will need the

Code: Select all

diffuse_filter

in estimation.