My basic model is from Cristian Alonso(2022),“Will the AI revolution cause a great divergence?”.
I add tax elements to this model, Some of the taxes in economically developed areas are transferred to families in economically Underdevelopment, And I give a shock to transfer payments.
But the results showed that The Jacobian of the static model is singular , there is 1 colinear relationships between the variables and the equations. in addition，There are 7 eigenvalue(s) larger than 1 in modulus for 6 forward-looking variable(s)，and Blanchard & Kahn conditions are not satisfied: indeterminacy.
adn The system prompts me that there is a collinearity problem with my Euler equation,I don’t know where the problem is.
in this model,the two regions can trade with each other and financial assets can flow freely
from one to the other,so B1+B2=0,but it seems like there’s a problem with this equation.In addition,I don’t know which equation is redundant.
I would be extremely grateful if anyone could give a look at my code and help me spot the problem!
Thanks in advance for your kindness!
My mod file cannot be uploaded, so I uploaded a Word file！！！！
please help me!!!
dynare problem.rar (14.5 KB)
Please paste it as text enclosed in ```
dynare .txt (4.3 KB)
I hope you can help me solve the problem，thanks!!!
Your model has a unit root. That explains the collinearity warning. But I am not sure that is the fundamental issue. Your model features instability. That’s often a timing problem.