Blanchard Kahn conditions are not satisfied_Productive public capital

Stochastic simulations
1

Hello,

I faced a problem when run a DSGE model with dynare, the error is “Blanchard Kahn conditions are not satisfied: no stable equilibrium”. I used model_diagnostics, but it told me this: MODEL_DIAGNOSTICS: No obvious problems with this mod-file were detected.

Can anybody help me to find out what’s the problem that i missed? I’ll very appreciate about that.

Attachment is my code and the error message that dynare shows:

Thank you.

Grafica_1_alt_Sg.mod (4.5 KB)

There are 8 eigenvalue(s) larger than 1 in modulus
for 7 forward-looking variable(s)

The rank condition ISN’T verified!

Error using print_info (line 42)
Blanchard Kahn conditions are not satisfied: no stable equilibrium

Error in stoch_simul (line 100)
print_info(info, options_.noprint, options_);

Error in Grafica_1_alt_Sg (line 379)
info = stoch_simul(var_list_);

Error in dynare (line 223)
evalin(‘base’,fname) ;

2

You are loading a mat-file you did not provide, so I cannot run the code. But I would try changing the fiscal rules to see whether different feedback leads to a stable solution.

4

What you describe sounds strange. It suggests that there is deeper problem. Are you sure that your current model setup allows for the government’s intertemporal budget constraint to be satisfied at all times?