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BGG model with bubbles

PostPosted: Fri Feb 10, 2012 2:39 pm
by happy
Hi guys,

I was trying to replicate the result of Bernake and Gertler's paper "monetary policy and asset price volatility" and confronted a weird error. When i ran the model, an error was reported:

Starting Dynare (version 4.2.4).
Starting preprocessing of the model file ...
Substitution of Expectation operator: added 2 auxiliary variables and equations.
ERROR: There are 20 equations but 19 endogenous variables!

My model exactly matches (A.1) to (A.18) of BG's paper (the extra two variables and two equations come from the substitution of EXPECTATION operator). I checked BG's paper carefully and found they have 18 equations but only 17 variables. Has anybody worked out BG's model?

Thanks a lot for any help,
Best regards,
Yin

Re: BGG model with bubbles

PostPosted: Tue Apr 14, 2015 2:47 pm
by econstudent100
Hi, did you get a solution for your problem?

Re: BGG model with bubbles

PostPosted: Tue Apr 14, 2015 2:55 pm
by jpfeifer
If I am not mistaken, the paper has 18 equations and the following 18 variables (in alphabetical)

c
c_e
g
i
k
l
mc
n
n
pi
q
r
r_n
r_q
r_s
s
y
z

Thus, you must be doing something wrong.

Re: BGG model with bubbles

PostPosted: Thu Apr 16, 2015 8:48 pm
by econstudent100
The problem is however how to implement the bursting of the bubble in the 5th period...

Re: BGG model with bubbles

PostPosted: Wed Apr 22, 2015 6:46 am
by jpfeifer
Have you already tried something to do that? What is your current take? Could you provide me with the most recent mod-file?

Re: BGG model with bubbles

PostPosted: Tue Feb 16, 2016 11:07 am
by robpancr
Haven't you written "n" twice?
I am not sure also what is the 18th variable, in that model



jpfeifer wrote:If I am not mistaken, the paper has 18 equations and the following 18 variables (in alphabetical)

c
c_e
g
i
k
l
mc
n
n
pi
q
r
r_n
r_q
r_s
s
y
z

Thus, you must be doing something wrong.

Re: BGG model with bubbles

PostPosted: Sat Feb 20, 2016 8:12 am
by jpfeifer
@robpancr: Good catch. n is there twice. So the user needs to identify the missing variable (or the redundant equation)

Re: BGG model with bubbles

PostPosted: Mon Feb 29, 2016 10:54 am
by robpancr
The problem is that If I read the paper carefully, I only count 17 variables and 18 equations...