# Blanchard & Kahn Conditions not satisfied (indeterminacy) Beginner Troubleshooting

Hi all,

I am pretty new to Dynare. I am probably also the last person anyone would expect to be using this program, coming from the field of experimental/behavioral economics.

Currently I am trying to work on a very simple model of life cycle utility maximization which focuses only on consumer choice (for right now). In each period of the model a consumer is endowed with an exogenously determined amount of income (deterministic and stochastic component), which is split between consumption or savings (or negative savings, if the consumer chooses to consume above the income in a certain period). The consumer’s utility function exhibits CARA risk preferences. Lastly, final asset holdings must equal zero in period 0 and in the final period. A consumer’s life cycle lasts 20 periods. Sorry if that was more information than was required…

In any event, I am attempting to use Dynare to find the optimal consumption/savings path (and possibly conditional consumption/saving paths). I know my model is simple and that this is generally not what the program is used for, but I want to ground myself in the basics before getting into more complicated stuff. To that end, I have the following code…

``````var c a w y;

varexo eps;
parameters theta y_mean;

theta = 0.02;
y_mean = 5;

model;
exp(-theta*(y + a(-1) - a)) = EXPECTATION(-1)(exp(-theta*(y(+1) - a(+1))))*exp(-theta*a);
y = y_mean + eps;
w = y + a(-1);
c + a = w;
end;

initval;
w = 0;
c = 5;
eps = 0;
a = 0;
y = 5;
end;

endval;
a = 0;
end;

shocks;
var eps;
periods 1:20;
values 1;
end;

stoch_simul(order = 1, periods = 20);
``````

When I attempt to run this code, I receive the following error message…

Error using print_info (line 32)
Blanchard & Kahn conditions are not satisfied: indeterminacy.

From what I can see in other threads, this has something to do with the timing of the variables, but I am not sure how to modify my code in order to address these issues. Any help would be greatly appreciated!

I am not sure Dynare can handle your problem, because you have a finite horizon problem that is stochastic. `stoch_simul` only handles time-invariant problems, while `perfect_foresight_solver` does not allow for a stochastic component.

Hello!
Could you please help my to determine what is wrong with my code? when I run it, I got the message: "Blanchard & Kahn conditions are not satisfied: indeterminacy."my.mod (4.1 KB)

``````rho_r = 0;                          // Taylor rule interest rate persistence