Robot_rule1a.mod (12.6 KB)

Dear professor,

I am doing a two-area model. It reports the error that BK condition is not satisifed, The rank condition is not satisfied. However I have checked the timing of this model for many times. I believe it’s right , I don’t know the reason. Could you look at my code and help me to solve it? Many thanks.

My reply to your earlier post

still applies. You need to simplify.

Thanks professsor.

I have simplified my model, If I minimize the model to a one-area model,It can nomarlly run. However, when I add it to two-area model, it failed, I don’t know why, it’s very strange.

Then something in closing the model causes the indeterminacy. Did you try different policy rules?

Yes professor.

I have tried strictly inflation targeting rule, and I also tried to change the persistence coefficient of Taylor rule, I even tried to change the timing of the nominal interest rate. All failed. I am crazy, could you help to have a look at my code and figure out it?Thanks

Then, there is most likely still a conceptual problem in the setup. That’s why I recommended a simpler setup. For example, try to figure out whether the problem is in one of the two sectors or affects both.

See

Dear professor, I need to set a passive tax rate rule. How can I solve this problem.

And How did you find this problem, why I didn’t realize it ？

Your model features explosiveness. Usually, that means debt is not sufficiently stabilized. In your case, this suggests that the fiscal-monetary regime does not feature a unique stable equilibrium.

Thank you professor.

Dear professor, last question, how did you draw a conclusion that this model is explosive? How did you analyze it?

The output is

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

for 5 forward-looking variable(s)The rank condition ISN’T verified!

Error using print_info

Blanchard & Kahn conditions are not satisfied: no stable equilibrium.

No stable equilibrium means explosiveness.

HaHaHaHa, thank you professor.