# Error message : help

Hello everyone,
I have a problem with the following dynare code where I try to solve a model with two households and two sectors. Each households work in the firm with the same name, the only interconnection between sector A and B is the inout-output structure between firm A and firm B. Firm A uses as an input , part of firm B output.

Dynare solves the steady states but does not solve the model, I get the following error message : One of the eigenvalues is close to 0/0 (the absolute value of numerator and denominator is smaller than
0.0000!

Can someone help see with this ?
I attach my dynare code.
Thank you very much.

Hugo

Simplemodel2.mod (3.8 KB)

That usually implies a fundamental singularity. Are you sure all variables in your model can be determined. For example, I see two prices showing up, but usually one of the goods is the numeraire whose price cannot be determined endogenously.

Dear Mr Pfeifer,

First of all thanks for your quick answer, indeed, I guess my problem comes from this. To simplify things I have removed prices in my model (both). I run again the model, dynare finds steady states but now I have another error message : Blanchard-Kahn conditions are not satisfied. I know what it means but I do not see where it comes from in my code. Could you please have a loot at it ?
I attach my new code.
Thanks in advance.
Hugo

Simplemodel2.mod (3.5 KB)

Check timing and signs. For example,

``````  y_a=a*x^vartheta*k_a^alpha*l_a^(1-alpha);
``````

has a strange timing for capital.

I have checked my equations and now it works. Can I just ask you a last question ?
Here my model is two households , two firms , households A work, invest and consume good from firm A and vice versa for households B, it is exactly the same as if I have two separate economies, the only link between A and B is due to the fact that firm A uses part of firm B output as an input. Do I need to normalize just one price or the two prices ? I have a doubt on this because I’m able to run the model in dynare when I normalize both prices but not when I give an explicit equation for one of the two prices.
Thanks in advance.
Hugo

Usually, you normalize one price and everything else is relative to it. However, I don’t know your market structure. It depends e.g. on whether there is another numeraire, e.g. the good in which labor is remunerated.

ok, thanks for this :).

Have a good day.

Best,
Hugo