2003 Smets and Wouters Replication Help! BK condition not satisfied indeterminacy due to rank failure

Dear Professor Pfeifer,

Would it be possible to take a brief look at my dynare code?

I am a beginner in Dynare and a PhD student who is trying to replicate 2003 Smets and Wouters to learn more about the New Keynesian Model.

However, I can’t seem to figure out why I am getting an

ERROR: BK condition not satisfied indeterminacy due to rank failure.

I have a feeling the error might be due to misspecified predetermined_variables.

If you can spot an obvious mistake in my dynare code, that would really help me out…

Sincerely,

Eric

SW_replication.mod (5.1 KB)

You need to check your timing. For example, you use

predetermined_variables K

but the timing in the model sets it already to be predetermined. In any case, you may want to have a look at the replication files in the Macro Model Base.
Also, there are typos in the original paper.

Dear Professor Pfeifer,

Thank you for the response, professor!

I will check out the Macro Model Base.

Sincerely,

Eric