Changing the timing of the shock to fit conditions

Dynare help (legacy posts)
1

Hello,

I am quite new in the use of dynare and I hope someone can help me in a problem of my code.
My problems are: Rank conditions is not verified and Blanchard Conditions are not satisfied.
I’ve being trying several manners to solve the problem, I did, somehow, but I am afraid it is not
a good solution.

The model has 10 eigenvalues and 9 forward looking variables. In my model I have 2 shocks,
technological and liquidity shock. I expressed them both as predetermined varibles, i.e.,
technological shock in t depending on previous period. So as I did with the liquidity shock.
The manner I solved was putting the liquidity shock as forward looking variable, i.e.,
liquidity shock in t+1 depending on previous period.

After this change, the code is working, but I am puzzled about the graphs that I am obtaining.
Could someone advice me about this change that I did? whether it is totally wrong or I should
check other solutions?

Thank you in advance.

Ferdinando

2

Hi,
have you figured out why it happens? I have met the same problem with you, and ‘solve’ it just as you did. Now I am confused the result and wondering whether it need adjustments! If you have made some progress, please just let me know.

Thank you very much.

3

Changing the timing of the shocks can alter the BK conditions, but this is definitely not a solution. Actually, this is very dangerous and my guess is that you are solution is wrong, hence the weird IRFs. You have to be sure that the timing of the variables is entered correctly. What do you mean by saying that you express both shocks as predetermined variables?