What might be the reason to have the warning during the estimation:
Warning: There isn't enough information to estimate the initial conditions of the nonstationary variables
It appeared after I introduced a new variable in the model , data_sdevU definded by equation
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data_sdevU - data_sdevU(-1) -data_sdevU_eps= lsU;
where lsU was in the model before and its steady state value is zero; data_sdevU_eps is the newly introduced exogenous shock.
The new variable enters the Taylor rule as the log deviation of the nominal x-rate from the central parity:
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lRU-log(R)=rhoR*(lRU(-1)-log(R))+(1-rhoR)*(lpitargetU-log(pitarget)+
rpi*(lpicU -lpitargetU)+
ry*(lylessdU-log(ylessd)) +
rs*data_sdevU) + epsR_eps/10;
where rs is newly defined parameter.
I've added data_sdevU=0; in the initval; block and defined its zero steady state value in the steady-state file (which involves fsolve). rs is also added to the steady-state file.
When running the .mod file, Dynare computes the steady state, confirms the rank condition but when the estimation starts, Dynare issues the above mentioned warning many times and then warns many times about "Matrix is close to singular or badly scaled". The estimation results appear ok but some of the variables (e.g. the interest rates or even deflators) have NaNs as theoretical moments although everything was ok before the introduction of the new variable.
The warnings appear regardless of whether data_sdevU is observable or not.
model_diagnostics(M_,options_,oo_) does not show any issue.
What might be wrong? How can I approach the problem?
