I am trying to replicate the article: “A Small New Keynesian Model of the New Zealand Economy”. However, I run into the error below. Could someone help me understand the problem.

Paper:

nz.pdf (406.8 KB)

Starting Dynare (version 5.1).

Calling Dynare with arguments: none

Starting preprocessing of the model file …

Found 14 equation(s).

Evaluating expressions…done

Computing static model derivatives (order 1).

Computing dynamic model derivatives (order 2).

Processing outputs …

done

Preprocessing completed.

STEADY-STATE RESULTS:

y 0

q 0

r 0

pi 0

pi_F 0

r_s 0

y_s 0

psi 0

s 0

c 0

mc 0

pi_H 0

a 0

pi_s 0

error: The generalized Schur (QZ) decomposition failed. For more information, see the documentation for Lapack function dgges: i

nfo=30, n=14. You can also run model_diagnostics to get more information on what may cause this problem.

error: called from

print_info at line 32 column 5

check at line 48 column 5

driver at line 342 column 15

dynare at line 281 column 5

*When I remove the +1 from pi_s(+1) I get IRF results, however, it says that r_s and pi_s are collinear. I don’t understand, I entered the codes all right and the values also from the paper, but the results don’t come out as they should.*

MODEL_DIAGNOSTICS: The Jacobian of the static model is singular

MODEL_DIAGNOSTICS: there is 1 colinear relationships between the variables and the equations

Colinear variables:

r_s

pi_s

Colinear equations

3 8 14

MODEL_DIAGNOSTICS: The singularity seems to be (partly) caused by the presence of a unit root

MODEL_DIAGNOSTICS: as the absolute value of one eigenvalue is in the range of ±1e-6 to 1.

MODEL_DIAGNOSTICS: If the model is actually supposed to feature unit root behavior, such a warning is expected,

MODEL_DIAGNOSTICS: but you should nevertheless check whether there is an additional singularity problem.

MODEL_DIAGNOSTICS: The presence of a singularity problem typically indicates that there is one

MODEL_DIAGNOSTICS: redundant equation entered in the model block, while another non-redundant equation

MODEL_DIAGNOSTICS: is missing. The problem often derives from Walras Law.

Model.mod (4.5 KB)