I’m getting the in the title mentioned error warning when running my mod file below together with:
There are 7 eigenvalue(s) larger than 1 in modulus
for 4 forward-looking variable(s)
The rank condition ISN’T verified!
I’ve already read the forum questions with regards to that error and it seems like it could be the consequence of wrong timing conventions wihtin the equations. However I’ve checked it for my code and it does not seem to be the case.
Could maybe anybody assist herewith?
I’m quite new to this kind of modelling and cannot debug the error.
Thanks for replying that fast. I just read through the post you suggested. Just to make sure I understand it correctly in my context: : the capital chosen by non-liquidity-constraint households (kNLC) would be predetermined, however the total capital k characterized by the equation you find strange is determined in t. Hence implying that the equation becomes: k=(1-lambda)kNLC(-1).
Does that make sense now?
Actually I posted an older version of my mod file. The law of motion i for kNLC. I adjusted my code now accordingly, meaning kNLC and bNLC are predetermined, k and b not (see below mod file). However it gives me the same error message. Could you please have a look and share some thoughts.
I added 4 shocks: a demand shock, production shock, monetary policy shock and a fiscal policy shock. I redistributed all intermediate firm’s profits to the non-liquidity constraint households (which are the dividends). Not sure how the paper deals with it. I do not have yet different lump sum taxes for the two households(the papers has that). And I have another taylor rule than in the paper. Additionally what I want to investigate specifically are the reactions of the consumption of LC and NLC households, rather than total consumption. Hence this is the reason why my equations do not enter in aggregate form only within the code. I wanted to implement a baseline model which works and build on that.
I tried to find the problem by checking again the timing, varying parameters and going through the equations, however I cannot find the mistake. Could you please elaborate on why the fiscal rules with b(+1) may be a problem?
Your thoughts and tipps would be of great help to me.