BK condition not satisfied- already checked the taylor rule parameters and timing issue

Stochastic simulations
1

Dear all,

I’m trying to run a model slightly different from the original one of Gerali(2010), the mod file is attached below
benchmark_model_1.mod (13.2 KB)
. However I confronted the problem “Blanchard & Kahn conditions are not satisfied: indeterminacy”. After checking the Taylor rule parameters and the timing of the model, I don’t know what else I can do.

Please help me if you have some insights.

Thank you!

1 Like
2

What did you change compared to the original model? Did you start with a running version before doing modifications?

3

Dear Prof. jpfeifer

I change the original model setup for research purposes, though not completed yet. The running version of the original paper is provided by MMB, which I’ll attach below. I compared the timing of my modified model and the MMB version and didn’t notice obvious differences. In other word, I’m stuck…

Thank you for your reply!
EA_GNSS10_rep.mod (26.3 KB)

4

Then you need to go back to the working version and see what introduces a problem.

5

Dear Prof. jpfeifer,

Does that mean the error of the FOC condition, despite correctly calculated steady state and timing, may induces BK condition not satisfied?

Thanks for your reply!

6

The mistake can be anywhere. A mistake in the FOCs can also affect the steady state. So being able to compute the steady state is not sufficient.

7

Thank you Prof. jpfeifer!