Extension of Simple Staggered Pricing Model

[Laddawan]

Hello,

I am trying to implement a 2-sector labour and production market into the simple model of staggered prices (see code attached). When I run my code in dynare (see code attached) it gives me the following error:

"Error using print_info (line 37)
The generalized Schur (QZ) decomposition failed. For more information, see the documentation for Lapack function dgges: info=14,
n=12. You can also run model_diagnostics to get more information on what may cause this problem.

Error in stoch_simul (line 98)
print_info(info, options_.noprint, options_);

Error in Dual_stagg_price_old (line 390)
info = stoch_simul(var_list_);

Error in dynare (line 180)
evalin('base',fname) ;"

Running the command "model_diagnostics(M_,options_,oo_)" then gives me:

"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."
and many collinear variables and equations.

I am only a beginner in this field and desperatly need help! What did I do wrong?
Thanks a lot in advance!

[Laddawan]

When I replaced one equation in the model block (see new code attached) and ran the code afterwards, it did not give me any (direct) errors but

Configuring Dynare ...
[mex] Generalized QZ.
[mex] Sylvester equation solution.
[mex] Kronecker products.
[mex] Sparse kronecker products.
[mex] Local state space iteration (second order).
[mex] Bytecode evaluation.
[mex] k-order perturbation solver.
[mex] k-order solution simulation.
[mex] Quasi Monte-Carlo sequence (Sobol).
[mex] Markov Switching SBVAR.

Starting Dynare (version 4.4.3).
Starting preprocessing of the model file ...
Found 22 equation(s).
Evaluating expressions...done
Computing static model derivatives:
- order 1
Computing dynamic model derivatives:
- order 1
- order 2
Processing outputs ...done
Preprocessing completed.
Starting MATLAB/Octave computing.


ans =

1

What exactly does it mean?

It would be great to get some feedback!

Best
Laddawan

[jpfeifer]

The second time you violate Matlab's naming convention. You cannot start a filename with a number. Also having multiple dots in not allowed. Regarding your model, run model_diagnostics to see

MODEL_DIAGNOSTICS: The Jacobian of the static model is singular
MODEL_DIAGNOSTICS: there is 3 colinear relationships between the variables and the equations
Relation 1
Colinear variables:
P
P_F
P_I
C_F
C_I
M
Relation 2
Colinear variables:
P
P_F
P_I
C_F
C_I
M
Relation 3
Colinear variables:
P
P_F
P_I
C_F
C_I
M
Relation 1
Colinear equations
14 15 18 20 21 22

Relation 2
Colinear equations
14 15 18 20 21 22

Relation 3
Colinear equations
14 15 18 20 21 22

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

[Laddawan]

Hey,

thanks for you reply. In the meantime I have done some adjustments with more restrictive assumptions. The problem was that the basic model already showed a colinear relationship between p and m. Dividing the price p into the two sectors (formal and informal) then did not run through anymore. Therefore, the underlying assumption is now that households working in one sector can only consume products from the very same sector.
Now it works (see neu.mod)!

Best,
Laddawan