The rank condition ISN'T verified!

[clara]

Hello,

I tried to replicate Thomas Carlos's paper as a first exercice with linear model (search frictions, real rigidities and Inflation Dynamics JMCB2011 ) . when i run my codes dynare posts the following message error. Can someone please tell me what i should do in this case?

equation are already log-linearised in the paper. I Attached the file. Thanks a lot!

There are 4 eigenvalue(s) larger than 1 in modulus
for 5 forward-looking variable(s)

The rank condition ISN'T verified!

??? Error using ==> print_info at 45
Blanchard Kahn conditions are not satisfied: indeterminacy

Error in ==> stoch_simul at 98
print_info(info, options_.noprint, options_);

Error in ==> testcarlos at 198
info = stoch_simul(var_list_);

Error in ==> dynare at 180
evalin('base',fname) ;

>>

[jpfeifer]

Your law of motion for employment violates Dynare's timing convention. You need to enter it as

Code: Select all

n_hat=(1-lambda-p)*n_hat(-1)+lambda*epsilon*theta_hat(-1);

Otherwise, if you have the n_hat(+1) at the left-hand side, you are not setting employment in period t+1 but its expectation. Basically, employment is a predetermined state. You also need to check the other equations whether the timing is correct.