Hello everyone, I am a beginner in dynare. I have found the steady-state value of the model.BUT when I run the stoch_simul function, it told me “Blanchard & Kahn conditions are not satisfied: indeterminacy.” I wonder what the problem is?

Here is my mod file.

paper11.mod (3.2 KB)

Thanks a lot.

The timing structure for capital is wrong. The mod file could run if you change the capital timing in industry.

Thanks for your reply, your suggestion is so useful.

In Dynare the timing denotes when the variable is decided on. Capital is a predetermined state, meaning it is chosen today, for production tomorrow (or today’s capital was chosen the period before), that’s why the timing of capital your production function is incorrect. You need to lag it. Similar adjustments apply in other equations like the RHS of capital dynamics.

Also, keep in mind that Dynare does not distinguish between E_t[K_{t+1}] and K_{t+1}, so if you use K(+1) you are actually indicating that that is the expected value of the variable which is not what you meant in your capital dynamics equation in case you meant to include K(+1) on the LHS (although you used K(1) which is the same as the K you have on the other side of the equation).