MJDGGES returns the following error code: 10 (Dynare v4.2.0)

[cyepez]

Hello,

I've been working all day on this RBC model (attached) and although I've tried all sorts of tricks mentioned in this forum I haven't been able to figure out what's the deal with the BK indeterminacy issue message here.

I get this message: MJDGGES returns the following error code: 10.

If you skip the check command prior to initval, the error message is: Blanchard Kahn conditions are not satisfied: indeterminacy

I've checked the model with the original paper plenty of times and it should work.

Please help. Otherwise I'll have to switch to Uhlig's toolkit...

Carlos

[jpfeifer]

Your problem is the stochastic discount factor. Its timing should always be m instead of m(+1). Also never put the check; command before the initval; and steady command as you are trying to test the BK-conditions at a point where all variables are 0. Only after the steady command do you compute them at the deterministic steady state.

[cyepez]

Hello jpfeifer.
The timing on the SDF did the trick. Many Thanks.
However, this brings up the question. If the SDF is by definition a forward looking variable (i.e. t+1) why is it that we need to adjust the timing to contemporaneous for it to work on Dynare?
Please comment and thanks again!
Carlos

[jpfeifer]

Hi,
that is only partly correct. The SDF contains forward looking terms. However, m itself is just a definition of a new name. You want to define something called m. But when you define m(+1), you do not define m, but the conditional expectation of m at time t, i.e. E_t(m(+1)).