Hello,
I am extending Rabanal and Rubio-Ramirez (2003) code posted in this forum allowing for shocks to government spending and tax revenues.
I am running the code and I have a problem concerning the determination of equilibrium.
In particular, I am obtaining the following output:
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EIGENVALUES:
Modulus Real Imaginary
0.4402 0.4402 0
0.5 0.5 0
0.5 0.5 0
0.5 0.5 0
0.5 0.5 0
1.072 1.072 0
1.074 1.069 0.1086
1.074 1.069 -0.1086
Inf Inf 0
Inf Inf 0
There are 5 eigenvalue(s) larger than 1 in modulus
for 4 forward-looking variable(s)
The rank condition ISN’T verified!
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I am wondering what can be the problem.
In addition, I do not understand well how dynare defines a variable as forward-looking, even for the case of the original posted Rabanal and Rubio-Ramirez (2003) code.
I wonder what considerations do I have to take into account when I define the model in the code (how many forward looking and predetermined variables I could allow for in my model) so that I do not have Blanchard and Kahn conditions violated when I run it.
Thanks,
apf