Dynare forums

Dear all,

I have a problem setting up my model with a ZLB constraint on interest rates. If I run a deterministic simulation without constraints there is an initial drop of the interest rate to -3%. When I implement it with the ZLB there is a warning:
Warning: Matrix is singular to working precision.
> In sim1 at 133
In simul at 108
In real_only_g_ZLB at 248
In dynare at 120

When I manually set the interest rate in the first period to 0 the algorithm converges and the ZLB is not binding anymore. I am wondering whether it is more likely that my ZLB-implementation is wrong or that there is only a solution if either the initial interest rate is negative or manually set to zero.

I appreciate any comments! Best, Palu

I would need the mod-file

Code: Select all

model_diagnostics

on your model B says

model_diagnostic: the Jacobian of the static model is singular
there is 1 colinear relationships between the variables and the equations
Colinear variables:
c
n
g
tau
gamma1
gamma2
gamma3
gamma4
Colinear equations
5 13

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