Blanchard Kahn conditions are not satisfied in open economy model:

Dear All, I have incorporate open economy in informal financial economy. I got error in my simulation as ‘Blanchard Kahn conditions are not satisfied: indeterminacy’. I tried to change timings but it didn’t work. please help, code is attached.openinform.mod (6.6 KB)

maybe you can get some clues from model_diagnostics(M_,options_,oo_)

I have checked all equations and check for timing also. But didn’t get it

it tells ‘no obvious problem with mod-file’.

I start with simpler model and it works, but when I add open economy it tells ‘Blanchard conditions are not satisfied: indeterminacy’. Although I worked on timing also but model didn’t work

That suggests a conceptual mistake at this step.

Also, try changing the values of the parameters of the model. Let’s say you have a DSGE model AX_{t+1} = BX_t + DZ_t, X = endogenous variables, Z_t = exogenous variables. Then X_{t+1} = A^{-1} BX_t + A^{-1} DZ_t. Blanchard Khan says the number of unstable eigenvalues of A^{-1} B must equal number of jump variables in X. A^{-1} B is a function of the DSGE model parameters and not all values of the parameters will satisfy BK conditions. Try other values for the parameters, maybe it will solve the problem.

thanks, I am also working on parameters. But it didn’t work also