Changing/recalibrating parameter values lets BK conditions fail

Dear all,

my model runs smoothly and makes sense for my initial calibration (taken from the initial model that I develop further). When I recalibrate my model to the country that I want to analyse (I use data to find sensible values for 2 “big ratios” to determine 2 parameters and recalculate the steady state using the steady_state_model block), the steady state is solved and the values make sense (are close to the values before). However the BK conditions fail. I noticed earlier that the solution of the model seems to be sensitive to some parameters.

What would be a good way to approach this problem apart from trial and error (i.e. fixing other parameters/variables in the steady state and solving the steady state again etc.)?

Thanks a lot.

Similar topics in the forum (that were never answered…):


You should conduct a sensitivity check to see which parameter drives the Blanchard/Kahn failure. You e.g. use the dynare_sensitivity-command for that. In cases like the one you describe, it makes sense to understand how the model works, i.e. which conditions need to be satisfied in order to obtain a unique stable solution.