Blanchard Kahn conditions are not satisfied: indeterminacy d

Thanks for your prompt response. I think cs=cs(+1)-(1/SIGMA)*(r-dp(+1)); has the right sign as it is supposed to negatively related to interest rate.

I see. It’s the standard Euler equation. But if I change that sign, the model runs. Strangely most of the model is just the standard NK model. Have you tried starting with that simpler model and seeing when the problem appears?

When I tried to relax the consumption constraint for unskilled worker to cu=cu(+1)-(1/SIGMA)*(r-dp(+1)); instead of cu=wu+lu;. I have error message as: Error using print_info (line 83)
Impossible to find the steady state. Either the model doesn’t have a steady state, there are an
infinity of steady states, or the guess values are too far from the solution.

I am not sure cu is the root cause of the problem.

Regards

It must have something to do with those equations. When I use

//% HH consumption
cu=wu+lu; 
cu=cu(+1)-(1/SIGMA)*(r-dp(+1)); 

the model runs.

Hi Jpfeifer,

Above comment refers. Could I please what does it really mean when I get an error message as: Error using print_info (line 83)
Impossible to find the steady state. Either the model doesn’t have a steady state, there are an
infinity of steady states, or the guess values are too far from the solution?

As //% HH consumption
cu=wu+lu;
cu=cu(+1)-(1/SIGMA)*(r-dp(+1)); does not really make sense.

Regards

Please provide the full file generating that error.

test1.mod (1.7 KB) Here is the file.

Dear Jpfeifer,

I hope you can help me on the above comment. Regards

All your steady state values need to be 0, including the one for r. Now your model has a unit root, explaining why the steady state cannot be found endogenously. This is most probably because the two consumption aggregates are perfect substitutes.

Dear professor jpfeifer,
I have the same problem in my model: “Blanchard & Kahn conditions are not satisfied: indeterminacy”, could please help me to figure out where is the mistake?moroco.mod (10.9 KB)

nkmodel.mod (1.5 KB)
Dear Jpfeifer,

After weeks of trying, I still can’t find the reason why the model doesn’t run.

It is really strange that the model runs if I change some values of my parameters. For example, if I set ETAS=1.13, ETAU=1.22 and RHO= any value less than 0.3, the model runs. I really don’t know why this is the case. I am very appreciative if you can help me on this.

Regards,
Vannak

Your steady state state looks strange. Why are you combining linear and nonlinear equations?

Dear Jpfeifer,

Thanks for your response. I combine linear and nonlinear because to linearise some of the equations I will need find the steady state analytically. Is it incorrect to combine linear and nonlinear?

Sorry, I am a novice in this so I might ask dumb question.

Regards,
Vannak

I have tried to put everything in nonlinear form. But, still the same problem arises. I am very appreciative if you can give me advice on this. Thanks

You need to consistently enter your model. You can combine linear and nonlinear equations, but only in a consistent manner. In your old version, you have negative steady state values for things that should not be negative.

Thanks for your response. Somehow, when I change some of the parameter values I will get the positive steady state. For example, if I set ETAS=1.13, ETAU=1.22 and RHO= any value less than 0.3, the model runs and positive steady state value is obtained. Would be really happy if you can advise me on this.

Please sit down and take your time to correct the model. You are the model builder and need to know which steady state values for the model make sense. My impression is that your mix of equations is inconsistent and causes the problem. I don’t think it is just a matter of parameters.

Hi, I also have an issue regarding Blanchard & Kahn conditions are not satisfied: no stable equilibrium

I use a model with loglinear and linearized variables. The linearized ones are debt (d), trade balance of tradable goods (NXtr) and the domestic interest rate, as the first 2 can have negative values in steady state and the last one depends on debt.

Could you help me professor?Thank you very much!

CodigoProyectoSeminarioInv.mod (4.1 KB)

See