I faced a problem when run a DSGE model with dynare, the error is “Blanchard Kahn conditions are not satisfied: indeterminacy”.
Can anybody help me to find out what’s the problem that i missed? I’ll very appreciate about that. Thank you.

Attachment is my code and the error message that dynare shows:

Error in stoch_simul (line 98)
print_info(info, options_.noprint, options_);

Error in coop_nash_thesis (line 304)
info = stoch_simul(var_list_);

Error in dynare (line 180)
evalin(‘base’,fname) ;

model_diagnostic: the Jacobian of the static model is singular
there is 1 colinear relationships between the variables and the equations
Colinear variables:
y
b
g
Colinear equations
1 4 5 7 10 11

The presence of a singularity problem typically indicates that there is one
redundant equation entered in the model block, while another non-redundant equation
is missing. The problem often derives from Walras Law. aa.mod (2.24 KB)

The problem is not with Dynare, but with the model’s equations. As the message says, although you have the number of variables that equals the number of uknowns, it seems you have entered one equations which should not be there and missign another equation that instead should be there. So, you need to find out what not useful equation you need to substitute.

[quote=“hlt215”]The problem is not with Dynare, but with the model’s equations. As the message says, although you have the number of variables that equals the number of uknowns, it seems you have entered one equations which should not be there and missign another equation that instead should be there. So, you need to find out what not useful equation you need to substitute.

Someone else might explain it better [/quote]

I understand the main reason for the problem. probably, I have resolved the system of equations incorrectly. This time I encounter a different problem when I solve the model again. I will be very pleased if you are interested.

The error I get is as follows;

Error using print_info (line 48)
Blanchard Kahn conditions are not satisfied: indeterminacy due to rank
failure

Error in stoch_simul (line 98)
print_info(info, options_.noprint, options_);

Error in coop_nash_thesis (line 394)
info = stoch_simul(var_list_);

Your model is still wrong. The unstable version will tell you

ERROR: If the model is declared linear the second derivatives must be equal to zero.
The following equations had non-zero second derivatives:
* Eq # 3
because e.g. b*g is not linear

[quote=“jpfeifer”]Your model is still wrong. The unstable version will tell you

ERROR: If the model is declared linear the second derivatives must be equal to zero.
The following equations had non-zero second derivatives:
* Eq # 3
because e.g. b*g is not linear[/quote]

I might have made a parenthesis mistake. However, Could it be a mistake? Or I get it wrong. Because the other model has the same equation and it works. I send both of them in attach. Thank you very much for your interest. aac.mod (2.72 KB) aa (2).mod (2.4 KB)

[quote=“jpfeifer”]You seem to have a timing problem in your model. Are you for example sure that the timing of

is correct?[/quote]

I think i sure it, also, I added that file named aa and if you check this you will see that do not any errors. And, it also have same b in this file. However, I will recheck and come back.

The BK conditions are about the interplay between the number predetermined variables and stable eigenvalues. Your timing of variables in the two files you posted are not immediately obvious. There is only one correct timing, but one can always get the model to run by fudging around with the timing. Thus, I wanted you to make sure that in both files the timing is really correct. b looked like a predetermined variable that may not have been treated that way.

I add public sector to Iacoviello (2005). I consider a fiscal rule that ensures the stability of government debt. I managed to solve the model when consumption, capital and labor taxes are used as instruments (the others are held constant at the steady state) but I get that B-K are not satisfied when government expenditure adjust to stabilize debt. I check the timing and the equations and everything looks correct. Any help will be appreciated! iacoviello_i.mod (7.83 KB)

You need to find out whether it is a matter of calibration/of the rule specification. In particular, i) what is the nonlinear form of the rule and did you correctly linearize it and ii) is there a simpler rule (e.g. only reacting to past debt) that works? Are you sure the signs of the coefficients are correctly specified? Note that too large a feedback can make a model explode, because the government may have too big a surplus.

The nonlinear fiscal rule is the following:
gt=gt-1-phib(bgyt-1-bgybar)-phibb(bgyt-bgyt-1)

where g =government spending
bgy =public debt-to-gdp ratio
bgybar=ss public debt-to-gdp ratio

I tried to simplify the rule and I also change the coefficient values but nothing works. The problem appears when I have public debt in period t and t-1 with government spending at t-1. Government spending shows up in the market clearing condition, and in the government budget constraint only.

This suggests the presence of a conceptual problem. Try to work with the easiest version of your model and the most simple rule. I am also puzzled by the unit root between

I think that there is something weird in the calibration. The time period in the model corresponds to one quarter in the data. Following some papers I consider b/Y=0.8*4. Then it seems that government spending react too much to public debt… if I consider 0.8 only everything works but then there is no difference if I look at the IRF with the case in which there is no public sector.

I attach the non-linear version of the model.
Thanks! basic_b.mod (10.5 KB)

Getting a version with feedback rules that satisfies the BK conditions can be tricky (as you are experiencing). That was the reason I suggested to start with a simpler version where it is easier to find the uniqueness and determinacy parameter region. And yes, too much feedback can indeed happen.