[quote=“jpfeifer”]See Pfeifer(2013): “A Guide to Specifying Observation Equations for the Estimation of DSGE Models” sites.google.com/site/pfeiferecon/Pfeifer_2013_Observation_Equations.pdf, Remark 3 (Variable Naming in Matlab and Dynare).

The naming of the parameter with mu conflicts with Matlab. Also see sites.google.com/site/pfeiferecon/Gali2008_chapter3.mod[/quote]

Thanks, Pfeiter. Your material is awesome, I will review in a good moment, as soon as possible.

Your hint works to me, the naming mu wasn’t good and so I renamed to mi.

But I still have problems with B-K conditions. I organized better my equations, included more than Gali2008_chapter3.mod (also, I included more variables, as wages, prices and prices that "maximized the market value of profits…"as described in Gali (2008, 44) - pstar.

I think I am adding some no necessary equation in place of a really necessary equation, but I don’t see what, and a better way is understand better what Matlab is saying with:

dynare gali2008rev

Configuring Dynare …

[mex] Generalized QZ.

[mex] Sylvester equation solution.

[mex] Kronecker products.

[mex] Sparse kronecker products.

[mex] Bytecode evaluation.

[mex] k-order perturbation solver.

[mex] k-order solution simulation.

Starting Dynare (version 4.2.5).

Starting preprocessing of the model file …

Found 15 equation(s).

Evaluating expressions…done

Computing static model derivatives:

- order 1

Computing dynamic model derivatives:
- order 1

Processing outputs …done

Preprocessing completed.

Starting MATLAB/Octave computing.

STEADY-STATE RESULTS:

y -0.195929

c -0.195929

n -0.293893

w 0.510178

p 1

i 0.0100503

pi 0

a 0

pstar 1

m 0.76387

yn -0.195929

rn 0.0100503

v 0

ytil 0

rreal 0.0100503

EIGENVALUES:

Modulus Real Imaginary

```
0 0 0
0.5 0.5 0
0.9 0.9 0
1 1 0
1.153 1.132 0.2197
1.153 1.132 -0.2197
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 at 43

Blanchard Kahn conditions are not satisfied: indeterminacy

Error in ==> stoch_simul at 71

print_info(info, options_.noprint);

Error in ==> gali2008rev at 218

info = stoch_simul(var_list_);

Error in ==> dynare at 120

evalin(‘base’,fname) ;

The part of:

"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 at 43

Blanchard Kahn conditions are not satisfied: indeterminacy"

is not clear to me, where I have to look for?

I am attaching a new file again.

Thank you very much for your reply.

gali2008rev.mod (4.54 KB)