a problem with eigenvalues equal to 1 and -1

[moslem6333]

Hi,
I'm estimating a DSGE model using Dynare. When I use "steady; check;" command, I find that there is tow eigenvalues equal to 1 and -1. Does that mean the endogenous variables are unit root? How to find that variable? What should I deal with it? Is there any consequence if there is a unit root variable in the model?

here is my mod file based on Medina, J. P. and C. Soto Model for The Chilean economy


Thank you,

[jpfeifer]

Yes, that means there are unit roots. To find them, you can look at the IRFs with a long horizon. The variables that do not return to 0 have a unit root.
Whether that is problematic depends on whether the unit roots are an economic feature of the model or due to a bug in your mod-file. If it is the former, there is no reason to worry. You just have to keep in mind that you will need the

Code: Select all

diffuse_filter

in estimation.