As I wrote above: this equation is definitely wrong as presented in the model. Hence, it’s unclear what the authors actually did.
I replaced the multiplication and division operators of equation 19 with the addition and subtraction operators respectively, and the following appears:
Starting Dynare (version 5.5).
Calling Dynare with arguments: none
Starting preprocessing of the model file ...
Substitution of exo lags: added 1 auxiliary variables and equations.
Found 53 equation(s).
Evaluating expressions...done
Computing static model derivatives (order 1).
Computing dynamic model derivatives (order 2).
Processing outputs ...
done
Preprocessing completed.
Residuals of the static equations:
Equation number 1 : -36.3523 : Consumption euler eq.(1)
Equation number 2 : -0.048647 : Investment euler eq.(2)
Equation number 3 : -1.0372 : Capital arbitrage eq.(3)
Equation number 4 : -0.0049369 : Capital stock evolves eq.(4)
Equation number 5 : 0.39916 : Output produced using capital and labor services eq.(5)
Equation number 6 : -49.4859 : Cost minimization yields the demand for labor eq.(6)
Equation number 7 : 0.4217 : Firms entrepeneurs net worth evolves eq.(7)
Equation number 8 : 0 : Firms entrepeneurs net worth equals your consumption eq.(8)
Equation number 9 : 212.7314 : Hybrid price setting eq.(9)
Equation number 10 : 27.2498 : Hybrid wage setting eq.(10)
Equation number 11 : 0.025745 : Credit spread eq.(11)
Equation number 12 : -50.8805 : Notional interest rate eq.(12)
Equation number 13 : 0 : Nominal interest rate eq.(13)
Equation number 14 : 0 : Monetary base eq.(14)
Equation number 15 : -0.28529 : Broad monetary supply.(15)
Equation number 16 : 0.63529 : Export demand eq.(16)
Equation number 17 : 1.4999 : Import demand eq.(17)
Equation number 18 : 163.795 : Expected movement in the real exchange rate eq.(18)
Equation number 19 : -0.9834 : Evolution of foreign bonds eq.(19)
Equation number 20 : 1.4364 : Aggregate resource constraint eq.(20)
Equation number 21 : 0.502 : Government spending shock eq.(21)
Equation number 22 : 0 : Investment specific shock eq.(22)
Equation number 23 : 0 : Productivity shock eq.(23)
Equation number 24 : 0 : Wage mark up shock eq.(24)
Equation number 25 : 0.00435 : Credit spread shock eq.(25)
Equation number 26 : -0.29735 : M1 shock eq.(26)
Equation number 27 : -0.16 : Import demand shock eq.(27)
Equation number 28 : 0 : Foreign real interest rate shock eq.(28)
Equation number 29 : 0 : Preference shock eq.(29)
Equation number 30 : 0 : Taylor rule shock eq.(30)
Equation number 31 : -0.315 : Price mark up shock eq.(31)
Equation number 32 : 0 : Labour supply shock eq.(32)
Equation number 33 : -0.015 : Net worth shock eq.(33)
Equation number 34 : -0.155 : Export demand shock eq.(34)
Equation number 35 : 0 : Foreign consumption shock eq.(35)
Equation number 36 : 0 : Foreign inflation shock eq.(36)
Equation number 37 : -0.4 : Observation equation output
Equation number 38 : -0.4 : Observation equation consumption
Equation number 39 : -0.4 : Observation equation investment
Equation number 40 : -0.4 : Observation equation real wage
Equation number 41 : -0.4 : Observation equation net worth
Equation number 42 : -0.4 : Observation equation monetary base
Equation number 43 : -0.4 : Observation equation monetary supply
Equation number 44 : -0.4 : Observation equation exports
Equation number 45 : -0.4 : Observation equation imports
Equation number 46 : 0.0258 : Observation equation foreign bonds
Equation number 47 : -1.26 : Observation equation inflation
Equation number 48 : 163.1623 : Observation equation interest rate
Equation number 49 : 0 : Observation equation hours worked
Equation number 50 : 0.0174 : Observation equation credit spread
Equation number 51 : 0.8416 : Observation equation cost of credit
Equation number 52 : 0.0068 : Observation equation real exchange rate
Warning: Matrix is singular to working precision.
> In evaluate_steady_state (line 305)
In steady_ (line 55)
In steady (line 80)
In prueba.driver (line 891)
In dynare (line 281)
Residuals of the static equations:
Equation number 1 : NaN : Consumption euler eq.(1)
Equation number 2 : NaN : Investment euler eq.(2)
Equation number 3 : NaN : Capital arbitrage eq.(3)
Equation number 4 : NaN : Capital stock evolves eq.(4)
Equation number 5 : NaN : Output produced using capital and labor services eq.(5)
Equation number 6 : NaN : Cost minimization yields the demand for labor eq.(6)
Equation number 7 : NaN : Firms entrepeneurs net worth evolves eq.(7)
Equation number 8 : NaN : Firms entrepeneurs net worth equals your consumption eq.(8)
Equation number 9 : NaN : Hybrid price setting eq.(9)
Equation number 10 : NaN : Hybrid wage setting eq.(10)
Equation number 11 : NaN : Credit spread eq.(11)
Equation number 12 : NaN : Notional interest rate eq.(12)
Equation number 13 : NaN : Nominal interest rate eq.(13)
Equation number 14 : 0 : Monetary base eq.(14)
Equation number 15 : NaN : Broad monetary supply.(15)
Equation number 16 : NaN : Export demand eq.(16)
Equation number 17 : NaN : Import demand eq.(17)
Equation number 18 : NaN : Expected movement in the real exchange rate eq.(18)
Equation number 19 : NaN : Evolution of foreign bonds eq.(19)
Equation number 20 : NaN : Aggregate resource constraint eq.(20)
Equation number 21 : 0 : Government spending shock eq.(21)
Equation number 22 : 0 : Investment specific shock eq.(22)
Equation number 23 : 0 : Productivity shock eq.(23)
Equation number 24 : 0 : Wage mark up shock eq.(24)
Equation number 25 : NaN : Credit spread shock eq.(25)
Equation number 26 : NaN : M1 shock eq.(26)
Equation number 27 : NaN : Import demand shock eq.(27)
Equation number 28 : 0 : Foreign real interest rate shock eq.(28)
Equation number 29 : 0 : Preference shock eq.(29)
Equation number 30 : 0 : Taylor rule shock eq.(30)
Equation number 31 : NaN : Price mark up shock eq.(31)
Equation number 32 : 0 : Labour supply shock eq.(32)
Equation number 33 : NaN : Net worth shock eq.(33)
Equation number 34 : NaN : Export demand shock eq.(34)
Equation number 35 : 0 : Foreign consumption shock eq.(35)
Equation number 36 : 0 : Foreign inflation shock eq.(36)
Equation number 37 : NaN : Observation equation output
Equation number 38 : NaN : Observation equation consumption
Equation number 39 : NaN : Observation equation investment
Equation number 40 : NaN : Observation equation real wage
Equation number 41 : NaN : Observation equation net worth
Equation number 42 : 0 : Observation equation monetary base
Equation number 43 : 0 : Observation equation monetary supply
Equation number 44 : NaN : Observation equation exports
Equation number 45 : NaN : Observation equation imports
Equation number 46 : NaN : Observation equation foreign bonds
Equation number 47 : NaN : Observation equation inflation
Equation number 48 : NaN : Observation equation interest rate
Equation number 49 : NaN : Observation equation hours worked
Equation number 50 : NaN : Observation equation credit spread
Equation number 51 : NaN : Observation equation cost of credit
Equation number 52 : NaN : Observation equation real exchange rate
Error using print_info (line 32)
The steady state has NaNs or Inf.
Error in steady (line 102)
print_info(info,options_.noprint, options_);
Error in prueba.driver (line 891)
steady;
Error in dynare (line 281)
evalin('base',[fname '.driver']);
prueba.mod (21.1 KB)
However, I am not convinced that the modification affects the model.
Your model is still incorrectly linearized. E.g.
pk = (1-delt)/(1-delt)+crk*pk(+1)+(crk/(1-delt+crk))*rk(+1)-cy(-1);
has a constant term (1-delt)/(1-delt)=1. If your model is properly linearized, pretty much all variables must have steady state 0 (with the exception of your observables).
First, modify the equation you mentioned previously, then modify other equations with similar problems. Added rho parameter values and their standard deviations. And the result was:
Starting Dynare (version 6.0).
Calling Dynare with arguments: none
Starting preprocessing of the model file ...
Substitution of exo lags: added 1 auxiliary variables and equations.
Found 53 equation(s).
Evaluating expressions...
Computing static model derivatives (order 1).
Normalizing the static model...
Normalization failed with cutoff, trying symbolic normalization...
Finding the optimal block decomposition of the static model...
22 block(s) found:
18 recursive block(s) and 4 simultaneous block(s).
the largest simultaneous block has 12 equation(s)
and 12 feedback variable(s).
Computing dynamic model derivatives (order 2).
Normalizing the dynamic model...
Finding the optimal block decomposition of the dynamic model...
7 block(s) found:
3 recursive block(s) and 4 simultaneous block(s).
the largest simultaneous block has 17 equation(s)
and 17 feedback variable(s).
Preprocessing completed.
Preprocessing time: 0h00m01s.
Residuals of the static equations:
Equation number 1: Consumption euler eq.(1) : -35.509242
Equation number 2: Investment euler eq.(2) : -0.047979
Equation number 3: Capital arbitrage eq.(3) : -0.407374
Equation number 4: Capital stock evolves eq.(4) : -0.005727
Equation number 5: Output produced using capital and labor services eq.(5) : 0.305514
Equation number 6: Cost minimization yields the demand for labor eq.(6) : -49.485935
Equation number 7: Firms entrepeneurs net worth evolves eq.(7) : 0.421700
Equation number 8: Firms entrepeneurs net worth equals your consumption eq.(8) : 0.000000
Equation number 9: Hybrid price setting eq.(9) : 212.731635
Equation number 10: Hybrid wage setting eq.(10) : 27.236504
Equation number 11: Credit spread eq.(11) : 0.025745
Equation number 12: Notional interest rate eq.(12) : -50.880537
Equation number 13: Nominal interest rate eq.(13) : 0.000000
Equation number 14: Monetary base eq.(14) : 0.000000
Equation number 15: Broad monetary supply.(15) : -0.285287
Equation number 16: Export demand eq.(16) : 0.635289
Equation number 17: Import demand eq.(17) : 1.499907
Equation number 18: Expected movement in the real exchange rate eq.(18) : 163.794967
Equation number 19: Evolution of foreign bonds eq.(19) : -0.983400
Equation number 20: Aggregate resource constraint eq.(20) : 1.436425
Equation number 21: Government spending shock eq.(21) : 0.502000
Equation number 22: Investment specific shock eq.(22) : 0.000000
Equation number 23: Productivity shock eq.(23) : 0.000000
Equation number 24: Wage mark up shock eq.(24) : 0.000000
Equation number 25: Credit spread shock eq.(25) : 0.004350
Equation number 26: M1 shock eq.(26) : -0.297350
Equation number 27: Import demand shock eq.(27) : -0.160000
Equation number 28: Foreign real interest rate shock eq.(28) : 0.000000
Equation number 29: Preference shock eq.(29) : 0.000000
Equation number 30: Taylor rule shock eq.(30) : 0.000000
Equation number 31: Price mark up shock eq.(31) : -0.315000
Equation number 32: Labour supply shock eq.(32) : 0.000000
Equation number 33: Net worth shock eq.(33) : -0.015000
Equation number 34: Export demand shock eq.(34) : -0.155000
Equation number 35: Foreign consumption shock eq.(35) : 0.000000
Equation number 36: Foreign inflation shock eq.(36) : 0.000000
Equation number 37: Observation equation output : -0.400000
Equation number 38: Observation equation consumption : -0.400000
Equation number 39: Observation equation investment : -0.400000
Equation number 40: Observation equation real wage : -0.400000
Equation number 41: Observation equation net worth : -0.400000
Equation number 42: Observation equation monetary base : -0.400000
Equation number 43: Observation equation monetary supply : -0.400000
Equation number 44: Observation equation exports : -0.400000
Equation number 45: Observation equation imports : -0.400000
Equation number 46: Observation equation foreign bonds : 0.025800
Equation number 47: Observation equation inflation : -1.260000
Equation number 48: Observation equation interest rate : 163.162287
Equation number 49: Observation equation hours worked : 0.000000
Equation number 50: Observation equation credit spread : 0.017400
Equation number 51: Observation equation cost of credit : 0.841600
Equation number 52: Observation equation real exchange rate : 0.006800
Warning: Matrix is singular to working precision.
> In evaluate_steady_state (line 339)
In steady (line 112)
In prueba.driver (line 1519)
In dynare (line 310)
STEADY-STATE RESULTS:
y -34.473
c 14.4892
inve 5.39924
pk -5.55112e-17
k 5.39924
lab -5.81909
n 0.895319
ce 0.895319
rk -11.3619
w -0.143543
pm 0.180637
r 0.604474
rnot 0.604474
ex 10.5254
im 8.46523
q 3.05014
bf Inf
m -1.11022e-16
m3 1.60626
pinf 0.604474
dy 0.4
dc 0.4
dinve 0.4
labobs -5.81909
cyobs -0.8416
dn 0.4
dw 0.4
pmobs 0.171937
robs 0.607154
dex 0.4
dim 0.4
qobs 3.04674
bfobs Inf
dm 0.4
dm3 0.4
pinfobs 1.23447
g 0
inv 0
a 0
wnk 0
ppm 0.0903186
m1 0
eim 4.23262
rf 0
b 0
tr 0
mp 0.302237
wls 0
pn 0.44766
eex 5.26269
cf 0
pifor 0
STEADY: numerical initial values or parameters incompatible with the following equations
19 46
Check whether your model is truly linear. Put "resid(1);" before "steady;" to see the problematic equations.
Error using print_info (line 33)
The steady state has NaNs or Inf.
Error in check (line 48)
print_info(info, 0, options_);
Error in prueba.driver (line 1520)
oo_.dr.eigval = check(M_,options_,oo_);
Error in dynare (line 310)
evalin('base',[fname '.driver']);
prueba.mod (21.7 KB)
Thanks for your help!
Focus on the equations with residuals. Also,
1.
c=1-cg-inve-constan-constaex+constaim;
inve=((1+(ctrend/100))-(1-delt))*(phip*((1-alfa)/alfa))*((conskn^cchi)*((1/1+bheta/100)^(-1))*((1+(ctrend/100))^sigmac)-(1-delt)/(alfa^alfa)*(1-alfa)^(1-alfa)/((phip*((conskn^cchi)*((1/1+bheta/100)^(-1))*((1+(ctrend/100))^sigmac)-(1-delt)^alfa))^(1/(1-alfa)))^(alfa-1));
need to be interchanged. Otherwise, you are using inve before it is defined.
2. You did not set the initial values for the observables.
Make modifications to the structure of the model, adding betabar and changing the order of psi, in addition to putting multiplications by sigmac first. And the residuals did not vary for the most part, only in C and in PK, changes are observed in the residuals, remaining as follows:
Starting Dynare (version 6.0).
Calling Dynare with arguments: none
Starting preprocessing of the model file ...
Substitution of exo lags: added 1 auxiliary variables and equations.
Found 53 equation(s).
Evaluating expressions...
Computing static model derivatives (order 1).
Normalizing the static model...
Normalization failed with cutoff, trying symbolic normalization...
Finding the optimal block decomposition of the static model...
22 block(s) found:
18 recursive block(s) and 4 simultaneous block(s).
the largest simultaneous block has 12 equation(s)
and 12 feedback variable(s).
Computing dynamic model derivatives (order 2).
Normalizing the dynamic model...
Finding the optimal block decomposition of the dynamic model...
7 block(s) found:
3 recursive block(s) and 4 simultaneous block(s).
the largest simultaneous block has 17 equation(s)
and 17 feedback variable(s).
Preprocessing completed.
Preprocessing time: 0h00m00s.
Residuals of the static equations:
Equation number 1: Consumption euler eq.(1) : -14.496302
Equation number 2: Investment euler eq.(2) : -0.047602
Equation number 3: Capital arbitrage eq.(3) : -0.407374
Equation number 4: Capital stock evolves eq.(4) : -0.005727
Equation number 5: Output produced using capital and labor services eq.(5) : 0.305514
Equation number 6: Cost minimization yields the demand for labor eq.(6) : -49.485935
Equation number 7: Firms entrepeneurs net worth evolves eq.(7) : 0.421700
Equation number 8: Firms entrepeneurs net worth equals your consumption eq.(8) : 0.000000
Equation number 9: Hybrid price setting eq.(9) : 212.731700
Equation number 10: Hybrid wage setting eq.(10) : 27.345090
Equation number 11: Credit spread eq.(11) : 0.025745
Equation number 12: Notional interest rate eq.(12) : -50.880537
Equation number 13: Nominal interest rate eq.(13) : 0.000000
Equation number 14: Monetary base eq.(14) : 0.000000
Equation number 15: Broad monetary supply.(15) : -0.285287
Equation number 16: Export demand eq.(16) : 0.635289
Equation number 17: Import demand eq.(17) : 1.700866
Equation number 18: Expected movement in the real exchange rate eq.(18) : 163.794967
Equation number 19: Evolution of foreign bonds eq.(19) : -0.983400
Equation number 20: Aggregate resource constraint eq.(20) : 0.576716
Equation number 21: Government spending shock eq.(21) : 0.502000
Equation number 22: Investment specific shock eq.(22) : 0.000000
Equation number 23: Productivity shock eq.(23) : 0.000000
Equation number 24: Wage mark up shock eq.(24) : 0.000000
Equation number 25: Credit spread shock eq.(25) : 0.004350
Equation number 26: M1 shock eq.(26) : -0.297350
Equation number 27: Import demand shock eq.(27) : -0.160000
Equation number 28: Foreign real interest rate shock eq.(28) : 0.000000
Equation number 29: Preference shock eq.(29) : 0.000000
Equation number 30: Taylor rule shock eq.(30) : 0.000000
Equation number 31: Price mark up shock eq.(31) : -0.315000
Equation number 32: Labour supply shock eq.(32) : 0.000000
Equation number 33: Net worth shock eq.(33) : -0.015000
Equation number 34: Export demand shock eq.(34) : -0.155000
Equation number 35: Foreign consumption shock eq.(35) : 0.000000
Equation number 36: Foreign inflation shock eq.(36) : 0.000000
Equation number 37: Observation equation output : -0.400000
Equation number 38: Observation equation consumption : -0.400000
Equation number 39: Observation equation investment : -0.400000
Equation number 40: Observation equation real wage : -0.400000
Equation number 41: Observation equation net worth : -0.400000
Equation number 42: Observation equation monetary base : -0.400000
Equation number 43: Observation equation monetary supply : -0.400000
Equation number 44: Observation equation exports : -0.400000
Equation number 45: Observation equation imports : -0.400000
Equation number 46: Observation equation foreign bonds : 0.025800
Equation number 47: Observation equation inflation : -1.260000
Equation number 48: Observation equation interest rate : 163.162287
Equation number 49: Observation equation hours worked : 0.000000
Equation number 50: Observation equation credit spread : 0.017400
Equation number 51: Observation equation cost of credit : 0.841600
Equation number 52: Observation equation real exchange rate : 0.006800
Warning: Matrix is singular to working precision.
> In evaluate_steady_state (line 339)
In steady (line 112)
In prueba.driver (line 1519)
In dynare (line 310)
STEADY-STATE RESULTS:
y -34.3369
c 14.4315
inve 5.37783
pk 0.0449099
k 5.37783
lab -5.79616
n 0.895319
ce 0.895319
rk -11.317
w -0.142987
pm 0.182056
r 0.602086
rnot 0.602086
ex 10.4735
im 8.4275
q 3.03595
bf -Inf
m -1.11022e-16
m3 1.59871
pinf 0.602086
dy 0.4
dc 0.4
dinve 0.4
labobs -5.79616
cyobs -0.8416
dn 0.4
dw 0.4
pmobs 0.173356
robs 0.604767
dex 0.4
dim 0.4
qobs 3.03255
bfobs -Inf
dm 0.4
dm3 0.4
pinfobs 1.23209
g 0
inv 0
a 0
wnk 0
ppm 0.091028
m1 0
eim 4.21375
rf 0
b 0
tr 0
mp 0.301043
wls 0
pn 0.44766
eex 5.23673
cf 0
pifor 0
STEADY: numerical initial values or parameters incompatible with the following equations
19 46
Check whether your model is truly linear. Put "resid(1);" before "steady;" to see the problematic equations.
Error using print_info (line 33)
The steady state has NaNs or Inf.
Error in check (line 48)
print_info(info, 0, options_);
Error in prueba.driver (line 1520)
oo_.dr.eigval = check(M_,options_,oo_);
Error in dynare (line 310)
evalin('base',[fname '.driver']);
prueba.mod (21.6 KB)
Is the model supposed to be linear? You declared it as such.
That’s right, I declared the model as linear, I tried declaring it without linear and the result is:
Starting Dynare (version 6.0).
Calling Dynare with arguments: none
Starting preprocessing of the model file …
Substitution of exo lags: added 1 auxiliary variables and equations.
Found 53 equation(s).
Evaluating expressions…
Computing static model derivatives (order 1).
Normalizing the static model…
Normalization failed with cutoff, trying symbolic normalization…
Finding the optimal block decomposition of the static model…
22 block(s) found:
18 recursive block(s) and 4 simultaneous block(s).
the largest simultaneous block has 12 equation(s)
and 12 feedback variable(s).
Computing dynamic model derivatives (order 2).
Normalizing the dynamic model…
Finding the optimal block decomposition of the dynamic model…
7 block(s) found:
3 recursive block(s) and 4 simultaneous block(s).
the largest simultaneous block has 17 equation(s)
and 17 feedback variable(s).
Preprocessing completed.
Preprocessing time: 0h00m00s.
Residuals of the static equations:
Equation number 1: Consumption euler eq.(1) : -14.496302
Equation number 2: Investment euler eq.(2) : -0.047602
Equation number 3: Capital arbitrage eq.(3) : -0.407374
Equation number 4: Capital stock evolves eq.(4) : -0.005727
Equation number 5: Output produced using capital and labor services eq.(5) : 0.305514
Equation number 6: Cost minimization yields the demand for labor eq.(6) : -49.485935
Equation number 7: Firms entrepeneurs net worth evolves eq.(7) : 0.421700
Equation number 8: Firms entrepeneurs net worth equals your consumption eq.(8) : 0.000000
Equation number 9: Hybrid price setting eq.(9) : 212.731700
Equation number 10: Hybrid wage setting eq.(10) : 27.345090
Equation number 11: Credit spread eq.(11) : 0.025745
Equation number 12: Notional interest rate eq.(12) : -50.880537
Equation number 13: Nominal interest rate eq.(13) : 0.000000
Equation number 14: Monetary base eq.(14) : 0.000000
Equation number 15: Broad monetary supply.(15) : -0.285287
Equation number 16: Export demand eq.(16) : 0.635289
Equation number 17: Import demand eq.(17) : 1.700866
Equation number 18: Expected movement in the real exchange rate eq.(18) : 163.794967
Equation number 19: Evolution of foreign bonds eq.(19) : -0.983400
Equation number 20: Aggregate resource constraint eq.(20) : 0.576716
Equation number 21: Government spending shock eq.(21) : 0.502000
Equation number 22: Investment specific shock eq.(22) : 0.000000
Equation number 23: Productivity shock eq.(23) : 0.000000
Equation number 24: Wage mark up shock eq.(24) : 0.000000
Equation number 25: Credit spread shock eq.(25) : 0.004350
Equation number 26: M1 shock eq.(26) : -0.297350
Equation number 27: Import demand shock eq.(27) : -0.160000
Equation number 28: Foreign real interest rate shock eq.(28) : 0.000000
Equation number 29: Preference shock eq.(29) : 0.000000
Equation number 30: Taylor rule shock eq.(30) : 0.000000
Equation number 31: Price mark up shock eq.(31) : -0.315000
Equation number 32: Labour supply shock eq.(32) : 0.000000
Equation number 33: Net worth shock eq.(33) : -0.015000
Equation number 34: Export demand shock eq.(34) : -0.155000
Equation number 35: Foreign consumption shock eq.(35) : 0.000000
Equation number 36: Foreign inflation shock eq.(36) : 0.000000
Equation number 37: Observation equation output : -0.400000
Equation number 38: Observation equation consumption : -0.400000
Equation number 39: Observation equation investment : -0.400000
Equation number 40: Observation equation real wage : -0.400000
Equation number 41: Observation equation net worth : -0.400000
Equation number 42: Observation equation monetary base : -0.400000
Equation number 43: Observation equation monetary supply : -0.400000
Equation number 44: Observation equation exports : -0.400000
Equation number 45: Observation equation imports : -0.400000
Equation number 46: Observation equation foreign bonds : 0.025800
Equation number 47: Observation equation inflation : -1.260000
Equation number 48: Observation equation interest rate : 163.162287
Equation number 49: Observation equation hours worked : 0.000000
Equation number 50: Observation equation credit spread : 0.017400
Equation number 51: Observation equation cost of credit : 0.841600
Equation number 52: Observation equation real exchange rate : 0.006800
DYNARE_SOLVE (solve_algo=2|4): the Dulmage-Mendelsohn decomposition returned a non-square block. This means that the Jacobian is singular. You may want to try another value for solve_algo.
Residuals of the static equations:
Equation number 1: Consumption euler eq.(1) : -14.496302
Equation number 2: Investment euler eq.(2) : -0.047602
Equation number 3: Capital arbitrage eq.(3) : -0.407374
Equation number 4: Capital stock evolves eq.(4) : -0.005727
Equation number 5: Output produced using capital and labor services eq.(5) : 0.305514
Equation number 6: Cost minimization yields the demand for labor eq.(6) : -49.485935
Equation number 7: Firms entrepeneurs net worth evolves eq.(7) : 0.421700
Equation number 8: Firms entrepeneurs net worth equals your consumption eq.(8) : 0.000000
Equation number 9: Hybrid price setting eq.(9) : 212.731700
Equation number 10: Hybrid wage setting eq.(10) : 27.345090
Equation number 11: Credit spread eq.(11) : 0.025745
Equation number 12: Notional interest rate eq.(12) : -50.880537
Equation number 13: Nominal interest rate eq.(13) : 0.000000
Equation number 14: Monetary base eq.(14) : 0.000000
Equation number 15: Broad monetary supply.(15) : -0.285287
Equation number 16: Export demand eq.(16) : 0.635289
Equation number 17: Import demand eq.(17) : 1.700866
Equation number 18: Expected movement in the real exchange rate eq.(18) : 163.794967
Equation number 19: Evolution of foreign bonds eq.(19) : -0.983400
Equation number 20: Aggregate resource constraint eq.(20) : 0.576716
Equation number 21: Government spending shock eq.(21) : 0.502000
Equation number 22: Investment specific shock eq.(22) : 0.000000
Equation number 23: Productivity shock eq.(23) : 0.000000
Equation number 24: Wage mark up shock eq.(24) : 0.000000
Equation number 25: Credit spread shock eq.(25) : 0.004350
Equation number 26: M1 shock eq.(26) : -0.297350
Equation number 27: Import demand shock eq.(27) : -0.160000
Equation number 28: Foreign real interest rate shock eq.(28) : 0.000000
Equation number 29: Preference shock eq.(29) : 0.000000
Equation number 30: Taylor rule shock eq.(30) : 0.000000
Equation number 31: Price mark up shock eq.(31) : -0.315000
Equation number 32: Labour supply shock eq.(32) : 0.000000
Equation number 33: Net worth shock eq.(33) : -0.015000
Equation number 34: Export demand shock eq.(34) : -0.155000
Equation number 35: Foreign consumption shock eq.(35) : 0.000000
Equation number 36: Foreign inflation shock eq.(36) : 0.000000
Equation number 37: Observation equation output : -0.400000
Equation number 38: Observation equation consumption : -0.400000
Equation number 39: Observation equation investment : -0.400000
Equation number 40: Observation equation real wage : -0.400000
Equation number 41: Observation equation net worth : -0.400000
Equation number 42: Observation equation monetary base : -0.400000
Equation number 43: Observation equation monetary supply : -0.400000
Equation number 44: Observation equation exports : -0.400000
Equation number 45: Observation equation imports : -0.400000
Equation number 46: Observation equation foreign bonds : 0.025800
Equation number 47: Observation equation inflation : -1.260000
Equation number 48: Observation equation interest rate : 163.162287
Equation number 49: Observation equation hours worked : 0.000000
Equation number 50: Observation equation credit spread : 0.017400
Equation number 51: Observation equation cost of credit : 0.841600
Equation number 52: Observation equation real exchange rate : 0.006800
Error using print_info (line 33)
Impossible to find the steady state (the sum of squared residuals of the static equations is 104710.4268). Either the model doesn’t have a steady state, there are an infinity of steady
states, or the guess values are too far from the solution
Error in steady (line 143)
print_info(info,options_.noprint, options_);
Error in prueba.driver (line 1519)
steady;
Error in dynare (line 310)
evalin(‘base’,[fname ‘.driver’]);
prueba.mod (21.6 KB)
But if the model is truly linear and correctly linearized, you should have a steady state of 0 for all endogenous variables, except for potentially the observables. That does not seem to be the case, suggesting mistakes.
Modify the structure of equations 1,2, 3, 4,5, 6,9,10,11,12,13,21, however, some problems persist in the residuals, although it is worth mentioning that I substantially improved in equations such as corresponding to the prices, with respect to the previous estimate. Despite these changes, the notional interest rate equation maintains a high residual, among others. And I don’t know where to go to get closer to the final result.
Normalizing the static model...
Normalization failed with cutoff, trying symbolic normalization...
Finding the optimal block decomposition of the static model...
20 block(s) found:
18 recursive block(s) and 2 simultaneous block(s).
the largest simultaneous block has 20 equation(s)
and 20 feedback variable(s).
Computing dynamic model derivatives (order 2).
Normalizing the dynamic model...
Finding the optimal block decomposition of the dynamic model...
4 block(s) found:
2 recursive block(s) and 2 simultaneous block(s).
the largest simultaneous block has 26 equation(s)
and 24 feedback variable(s).
Preprocessing completed.
Preprocessing time: 0h00m00s.
Residuals of the static equations:
Equation number 1: Consumption euler eq.(1) : -14.496302
Equation number 2: Investment euler eq.(2) : -0.156335
Equation number 3: Capital arbitrage eq.(3) : -0.407374
Equation number 4: Capital stock evolves eq.(4) : -0.297031
Equation number 5: Output produced using capital and labor services eq.(5) : -0.600841
Equation number 6: Cost minimization yields the demand for labor eq.(6) : 49.485935
Equation number 7: Firms entrepeneurs net worth evolves eq.(7) : 1.010820
Equation number 8: Firms entrepeneurs net worth equals your consumption eq.(8) : 0.000000
Equation number 9: Hybrid price setting eq.(9) : 0.573176
Equation number 10: Hybrid wage setting eq.(10) : 27.673534
Equation number 11: Credit spread eq.(11) : 0.025745
Equation number 12: Commercial lending rate eq.(12) : 163.382867
Equation number 13: Notional interest rate eq.(13) : -50.880537
Equation number 14: Nominal interest rate eq.(14) : 0.000000
Equation number 15: Monetary base eq.(15) : 0.000000
Equation number 16: Broad monetary supply.(16) : -0.285287
Equation number 17: Export demand eq.(17) : 0.635289
Equation number 18: Import demand eq.(18) : 1.700866
Equation number 19: Expected movement in the real exchange rate eq.(19) : 163.794967
Equation number 20: Evolution of foreign bonds eq.(20) : -0.673400
Equation number 21: Aggregate resource constraint eq.(21) : -1.356464
Equation number 22: Mark up prices neokeynesian model eq.(22) : -40.157928
Equation number 23: Mark up prices neoclassical model.(23) : -11.564445
Equation number 24: Law of motion for capital.(24) : -0.005805
Equation number 25: Government spending shock eq.(25) : 0.502000
Equation number 26: Investment specific shock eq.(26) : 0.000000
Equation number 27: Productivity shock eq.(27) : 0.000000
Equation number 28: Wage mark up shock eq.(28) : 0.000000
Equation number 29: Credit spread shock eq.(29) : 0.004350
Equation number 30: M1 shock eq.(30) : -0.297350
Equation number 31: Import demand shock eq.(31) : -0.160000
Equation number 32: Foreign real interest rate shock eq.(32) : 0.000000
Equation number 33: Preference shock eq.(33) : 0.000000
Equation number 34: Taylor rule shock eq.(34) : 0.000000
Equation number 35: Price mark up shock eq.(35) : -0.315000
Equation number 36: Labour supply shock eq.(36) : 0.000000
Equation number 37: Net worth shock eq.(37) : -0.015000
Equation number 38: Export demand shock eq.(38) : -0.155000
Equation number 39: Foreign consumption shock eq.(39) : 0.000000
Equation number 40: Foreign inflation shock eq.(40) : 0.000000
Equation number 41: Observation equation output : -0.400000
Equation number 42: Observation equation consumption : -0.400000
Equation number 43: Observation equation investment : -0.400000
Equation number 44: Observation equation real wage : -0.400000
Equation number 45: Observation equation net worth : -0.400000
Equation number 46: Observation equation monetary base : -0.400000
Equation number 47: Observation equation monetary supply : -0.400000
Equation number 48: Observation equation exports : -0.400000
Equation number 49: Observation equation imports : -0.400000
Equation number 50: Observation equation foreign bonds : 0.025800
Equation number 51: Observation equation inflation : -1.260000
Equation number 52: Observation equation interest rate : 162.896925
Equation number 53: Observation equation hours worked : 0.000000
Equation number 54: Observation equation credit spread : 0.017400
Equation number 55: Observation equation cost of credit : 0.841600
Equation number 56: Observation equation real exchange rate : 0.006800
Warning: Matrix is singular to working precision.
> In evaluate_steady_state (line 339)
In steady (line 112)
In prueba.driver (line 1515)
In dynare (line 310)
STEADY-STATE RESULTS:
y 0.977497
c -0.245045
inve -0.294377
pk 1.08856
k -0.0225045
lab 0.0817335
n 0.199436
ce 0.199436
rk 0.0340147
w -0.0702234
pm -0.0390562
r -0.0171401
rnot -0.0171401
ex -2.58522
im -1.37323
q -0.531991
bf -Inf
m -1.11022e-16
m3 -0.0743296
pinf -0.0171401
dy 0.4
dc 0.4
dinve 0.4
labobs 0.0817335
cyobs -0.459856
dn 0.4
dw 0.4
pmobs -0.0477562
robs 0.250902
dex 0.4
dim 0.4
qobs -0.535391
bfobs -Inf
dm 0.4
dm3 0.4
pinfobs 0.61286
g 0
inv 0
a 0
wnk 0
ppm -0.0195281
m1 0
eim -0.686614
rf 0
b 0
tr 0
mp -0.00857004
wls 0
pn 0.0997181
eex -1.29261
cf 0
pifor 0
mcnk -0.0504911
mcnc -0.0163973
kp -0.294377
cy -0.0390562
STEADY: numerical initial values or parameters incompatible with the following equations
20 50
Check whether your model is truly linear. Put "resid(1);" before "steady;" to see the problematic equations.
Error using print_info (line 33)
The steady state has NaNs or Inf.
Error in check (line 48)
print_info(info, 0, options_);
Error in prueba.driver (line 1516)
oo_.dr.eigval = check(M_,options_,oo_);
Error in dynare (line 310)
evalin('base',[fname '.driver']);
prueba.mod (22.0 KB)
Thoroughly check your codes. Given the linearity of the model, only a select few variables should have a steady state different from 0, most notably the observables.