Hi everyone,

I am new to dynare so there are probably several interrelated sources of confusion here.

I am trying to replicate Rabanal and Rubio-Ramirez, “Comparing New Keynesian models of the business cycle: A Bayesian approach”, JME (2005).

They have their model already linearized around the steady state, so this is what I used for the model equations.

I began by simulating the model using the means of their estimated posterior distributions for parameter values. This goes through.

I then try to estimate their model using, as they do, data on output, prices, wages and interest rate. Here is where I am stuck.

For the eigenvalues I get

```
EIGENVALUES:
Modulus Real Imaginary
0.4391 0.4391 0
0.8 0.8 0
0.85 0.85 0
1 1 0
1.011 1.011 0
1.047 1.047 0
Inf Inf 0
There are 3 eigenvalue(s) larger than 1 in modulus
for 3 forward-looking variable(s)
The rank condition is verified.
```

So it seems I have a unit root. Might this be the reason for the following problem?

```
Error in computing likelihood for initial parameter values
Error using print_info (line 40)
Blanchard Kahn conditions are not satisfied: no stable equilibrium
```

Help appreciated,

Sebastian

rrr_data_1.xls (37 KB)

BSP_1.mod (1.68 KB)