Why isn’t the BK condition satisfied when “There are 6 eigenvalue(s) larger than 1 in modulus
for 6 forward-looking variable(s)”
It says that the rank condition is not verified…
I attach the code. Any help will be appreciated.
. ppru_baseline_sep23a.mod (8.3 KB)
Your problem is due to a rank failure. As
MODEL_DIAGNOSTICS: The Jacobian of the static model is singular
MODEL_DIAGNOSTICS: there is 1 colinear relationships between the variables and the equations
MODEL_DIAGNOSTICS: The singularity seems to be (partly) caused by the presence of a unit root
MODEL_DIAGNOSTICS: as the absolute value of one eigenvalue is in the range of ±1e-6 to 1.
MODEL_DIAGNOSTICS: If the model is actually supposed to feature unit root behavior, such a warning is expected,
MODEL_DIAGNOSTICS: but you should nevertheless check whether there is an additional singularity problem.
MODEL_DIAGNOSTICS: The presence of a singularity problem typically indicates that there is one
MODEL_DIAGNOSTICS: redundant equation entered in the model block, while another non-redundant equation
MODEL_DIAGNOSTICS: is missing. The problem often derives from Walras Law.