dear Michael,

many thanks again for all your help in prompt replies to our queries.

On the question of rank condition which I presume follows the Blanchard and Kahn solution conditions.

We run two tests, the first being with one endogenous backward looking variable; and the statement we get is:

“There are 0 eigenvalue(s) larger than 1 in modulus for 1 forward-looking variable(s). The rank condition is verified.”

The first question is: why does it tell us that it is a forward looking ( we indeed get an eignevalue less than 1).

Secondly, running the same simulation with five endogenous, of which 1 forward looking and 4 backward-looking and we get the following statement:

“There are 3 eigenvalue(s) larger than 1 in modulus

for 4 forward-looking variable(s). The rank conditions ISN’T verified!”

a) why not just 1 forward looking variable ?

b) we also get two infinite eigenvalues. How’s that possible ?

c) depending on the system we work with, we get sometimes a different number of eigenvalues (fewer or more) than there are declared endogenous variables;

d) is there an order in which we have to enter the equations or variables so that dynare knows which are backward or forward looking variables ?

We’ld be grateful if you could give us a hint on what it means.

P.S. We’ve attached two files:

a) flexp4.mod regards the 1st question (it includes a stoch_simul which we had included as a test. But the rank conditions we get with just simul are the same. That is the part that is intriguing us).

b) flexp.mod regards the 2nd question.

with best regards,

martom

martom_question.zip (1.03 KB)