Dear all
I am following the paper of Dhawan and Jeske (2008) " Energy Price Shocks and the Macroeconomy The Role of Consumer Durables"
and adding the subsidy policy from the paper of Bouakez ,Rebei and Vencatachellum (2008) "Optimal oil price pass through in an economy with rigidity ".
Above is my code files, after i run it on Dynare 4.3.2 , it comes some error:
[code]var N D E_h W H R Z K E_f Y I_D I_K P_E P_H tau P_Ef P_Eh G r pi ;
varexo var_Z var_P var_G;
parameters
KoIK delta_K DoID delta_D alpha KoX E_foX gamma NoD DoA E_hoA
rho Hss tauss Rss beta phi NoY I_DoY I_KOY GoY rho_p
rho_Z WHoY RKoY E_foY E_hoY chi_f chi_h rho_G
;
KoIK = 64.11039342 ;
delta_K = 0.0156 ;
DoID = 14.67088608 ;
delta_D = 0.0788 ;
alpha = 0.36 ;
KoX = 0.864115446 ;
E_foX = 0.135884554 ;
gamma = 0.8032 ;
NoD = 0.48336497 ;
DoA = 0.701892907 ;
E_hoA = 0.298107093 ;
rho = -2.8748 ;
Hss = 0.3 ;
tauss = 0.148 ;
Rss = 0.03016 ;
beta = 0.99 ;
phi = -0.7 ;
NoY = 0.56022 ;
I_DoY = 0.0790438 ;
I_KOY = 0.1703208 ;
GoY = 0.1 ;
rho_p = 0.9753 ;
rho_Z = 0.95 ;
WHoY = 0.64 ;
RKoY = 0.32928688 ;
E_foY = 0.05178 ;
E_hoY = 0.0387 ;
chi_f = 0.5 ;
chi_h = 0.5 ;
rho_G = 0.95 ;
model (linear);
//1.capital accumulate
I_K=KoIK*K-(1-delta_K)KoIKK(-1);
//2.durable accumulate
I_D=DoID*D-(1-delta_D)DoIDD(-1);
//3.production function
Y= Z + (alpha)(KoXK(-1)+E_foX*E_f)+(1-alpha)*H;
//4.durable good
0=beta*(1-gamma)/gammaNoDDoA*(N+(rho-1)D- (DoArhoD+ E_hoArhoE_h(+1)))+beta(1-delta_D)*(N-N(+1));
//5.energy consumption
(rho-1)E_h+N-P_Eh+P_H = DoArhoD(-1)+E_hoArho*E_h;
//6.hour work
N+P_H=W- Hss/(1-Hss)*H-tauss/(1-tauss)*tau;
//7.capital input
-N=-N(+1)+betaRss(1-tauss)*(R(+1)-P_H(+1)-tauss/(1-tauss)*tau(+1));
//10.firm energy use
P_Ef=P_H+Y- (KoXphiK(-1)+E_foXphiE_f) +(phi-1)*E_f;
//11.wage ok
W+H=Y+P_H;
//12.real inrerest rate
R=P_H+Y- (KoXphiK(-1)+E_foXphiE_f) +(phi-1)*K(-1);
//13.resource constraint
Y=NoYN + I_DoYI_D + I_KOY*I_K + GoY *G +(P_E+E_h-P_H) + (P_E+E_f-P_H);
//14.energy price shock
P_E=rho_p*P_E(-1)+var_P;
//16.technology shock
Z=rho_Z*Z(-1)+var_Z;
//20.home good price
P_H+Y=WHoY*(W+H)+RKoY*(R+K(-1))+E_foY*(P_Ef+E_f);
//21. firm energy price
P_Ef=(1-chi_f)P_Ef(-1)+chi_fP_E;
//22. hh energy price
P_Eh=(1-chi_h)P_Eh(-1)+chi_hP_E;
//23. goverment budget
taussWHoY(tau+W+H)+taussRKoY(tau+R+K(-1))=(1-chi_f)(P_E-P_Ef(-1))+(1-chi_h)(P_E-P_Eh(-1))+GoY*G;
//24. government spending shock
G=rho_G*G(-1)+var_G;
//25
r=R-P_H;
//26.pi
pi=P_H-P_H(-1);
end;
initval;
N = 0 ;
D = 0 ;
E_h = 0 ;
W = 0 ;
H = 0 ;
R = 0 ;
Z = 0 ;
K = 0 ;
E_f = 0 ;
Y = 0 ;
I_D = 0 ;
I_K = 0 ;
P_E = 0 ;
P_H = 0 ;
tau = 0 ;
P_Ef = 0 ;
P_Eh = 0 ;
G = 0 ;
r = 0;
pi = 0;
end;
resid;
shocks;
//technology shock
var var_Z; stderr 1;
//internation energy shock
var var_P; stderr 1;
//government
var var_G; stderr 1;
end;
steady;
check;
stoch_simul(periods=2000,irf=40); dynasave(‘mmex1.mat’); [/code]
The error from dynare says that :
[quote]There are 4 eigenvalue(s) larger than 1 in modulus
for 5 forward-looking variable(s)
The rank conditions ISN’T verified!
??? Error using ==> print_info at 43
Blanchard Kahn conditions are not satisfied: indeterminacy
Error in ==> stoch_simul at 81
print_info(info, options_.noprint);
Error in ==> JB_2008with_subsidy at 289
info = stoch_simul(var_list_);
Error in ==> dynare at 120
evalin(‘base’,fname) ;[/quote]
I really can’t find out where the problem is, i have already checked the predetermined variables ( K D ),
It will be grateful if anyone could solve the problem for me. Because it is part of my thesis, really makes important to me.
In advance, Thanks for your kind attention.
Hank