Hello, I am trying to implement a basic cash in advance/limited participation model in dynare. But I have several questions.

First, I keep getting an error message about the rank condition.

[quote]There are 6 eigenvalue(s) larger than 1 in modulus

for 6 forward-looking variable(s)

The rank condition ISN’T verified!

Error using print_info (line 48)

Blanchard Kahn conditions are not satisfied: indeterminacy due to rank failure[/quote]

I know that dynare is stating a problem about having perfect collinearity in the model and I should replace one of the equations. Since I believe my model is correct, is hard for me to identify which equation is wrong. when I run model diagnostic for help I get the following message

[quote]>> model_diagnostics(M_, options_, oo_)

The following endogenous variables aren’t present at the current period in the model:

pi [/quote]

where pi is the inflation rate. In this model I should not have pi in the current period. So I don’t know if that is a problem, or is just stating a fact. Besides when I change the timing of the equation to have pi in the current period it states that I don’t have enough eigenvalues greater than 1.

Finally, a question about the sintaxis of the model. In this model the cash holdings are set a period earlier, so I set it as a predetermined variable. Could someone confirm that this is correct please.

Many Thanks!

CIA model.pdf (138 KB)

sec_year_paper_smallfirm06_con_bancos_c.mod (4.31 KB)