Hi dear dynare’s users. I’m doing my master thesis on a soe with two sectors but i’m not able to run the simulation because of some collinearity problem and the missing of one eigenvalue>1 respect of the number of jumpers (seen with diagnostic option). In order to find out where is the problem I’ve split my model in two different submodels. In the first case I’ve used the same equation, with two sector but in a closed economy setup, thus removing all foreign processes and exchange variables. In the second, I used only one sector (all the goods are tradables) but in a open economy setup. The result is that with the closed economy dynare run without collinearity but in the open one the error is the same of the original model. I post the mod file of the one sector open economy in the hope that someone can help me in finding the problem’s solution.

Please to note that I don’t think it is a parameters problem because I’ve used the same in closed economy with the expected result. Morover the parameters declared in the model are more than which are really used in the equations because I simply copied them from the original model.

Furthemore I’ve try to do various manipulation to remove the collinearity but they still resist. I wonder if there is some that i miss in the model specification

Thanks in advance

This is the error message:

model_diagnostic: the Jacobian of the static model is singular

there is 3 colinear relationships between the variables and the equations

Relation 1

Colinear variables:

c

w_p

h

pth_p

cth

e

yth

hth

cths

y

ptf_p

ctf

q

ps

Relation 2

Colinear variables:

c

w_p

h

pth_p

cth

e

yth

hth

cths

y

ptf_p

ctf

q

ps

Relation 3

Colinear variables:

c

w_p

h

pth_p

cth

e

yth

hth

cths

y

ptf_p

ctf

q

ps

Relation 1

Colinear equations

1 10 11 18 20 21 22

Relation 2

Colinear equations

1 10 11 18 20 21 22

Relation 3

Colinear equations

1 10 11 18 20 21 22

EIGENVALUES:

Modulus Real Imaginary

```
1.4e-16 -1.4e-16 0
0.03343 0.03343 0
0.3 0.3 0
0.3 0.3 0
0.5 0.5 0
0.8 0.8 0
1 1 0
1 1 0
1 1 0
1.001 1.001 0
21.69 21.69 0
Inf Inf 0
```

There are 3 eigenvalue(s) larger than 1 in modulus

for 4 forward-looking variable(s)

The rank conditions ISN’T verified!

Error using print_info (line 43)

Blanchard Kahn conditions are not satisfied: indeterminacy

Error in stoch_simul (line 81)

print_info(info, options_.noprint);

Error in Open (line 269)

info = stoch_simul(var_list_);

Error in dynare (line 120)

evalin(‘base’,fname) ;

Open.mod (2.89 KB)