Dear all,

I try to replicate the model from “An Estimated Dynamic Stochastic General Equilibrium Model of the Jordanian Economy” by Samya Beidas-Strom and Tigran Poghosyan (2011)

I check the steady state and resid, which all takes value of 0 nicely as they should be.

However, I got an error “Blanchard Kahn conditions are not satisfied: indeterminacy,” so I look through the forum and found that I have to check for my eigenvalues

Then I check for eigenvalues and found out “There are 4 eigenvalue(s) larger than 1 in modulus for 5 forward-looking variable(s).”

This led me to another forum suggested to use model diagnostic to get further information. I got the following.

MODEL_DIAGNOSTICS: The Jacobian of the static model is singular

MODEL_DIAGNOSTICS: there is 2 colinear relationships between the variables and the equations

Relation 1

Colinear variables:

pfstar

pf

e

p

Relation 2

Colinear variables:

pfstar

pf

e

p

Relation 1

Colinear equations

Columns 1 through 20

```
1 2 3 6 7 8 9 10 11 12 13 14 16 17 18 19 20 21 22 23
```

Columns 21 through 31

```
24 25 26 27 28 29 30 32 33 34 35
```

Relation 2

Colinear equations

21 22

## 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.

Can any one explain for me how to interpret this and possibly how can I fix my model.

Thank you very much for your time.

Sincerely,

Far

Model.mod (4.1 KB)