I am trying to run a DSGE model(fiscal) based on dynare but I am receveing the following error:

??? Error using ==> print_info at 57
Impossible to find the steady state. Either the model doesn’t have a steady state, there are an infinity of steady
states, or the guess values are too far from the solution

Error in ==> steady at 92
print_info(info,options_.noprint);

Error in ==> fiscal at 168
steady;

Error in ==> dynare at 120
evalin(‘base’,fname) ;

after I linearize the model(fiscal1), the error is :

There are 2 eigenvalue(s) larger than 1 in modulus
for 3 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 81
print_info(info, options_.noprint);

Error in ==> fiscal1 at 223
info = stoch_simul(var_list_);

Error in ==> dynare at 120
evalin(‘base’,fname) ;

What is the problem with it ?How can I deal with it? This puzzlement had been haunting my mind for a long time,
I appreciate your advice and insight into the problem.Thanks a lot. fiscal1.mod (985 Bytes) fiscal.mod (901 Bytes)

Hi, you probably need to think harder about the initial conditions declared in the initval block. For instance you forgot to declare the initial condition for variable tc. If I add tc=c*(gc^rho); in the initval block and set g equal to 0 instead of 1.065 (which is not sensible for a zero mean autoregressive process) in the same block I obtain a steady state. Problem is that this steady state displays a negative consumption level (as a consequence the model cannot be solved), so it is probably not the steady state you are looking for… I think that you need to play with the initial conditions and/or the calibration.

[quote=“StephaneAdjemian”]Hi, you probably need to think harder about the initial conditions declared in the initval block. For instance you forgot to declare the initial condition for variable tc. If I add tc=c*(gc^rho); in the initval block and set g equal to 0 instead of 1.065 (which is not sensible for a zero mean autoregressive process) in the same block I obtain a steady state. Problem is that this steady state displays a negative consumption level (as a consequence the model cannot be solved), so it is probably not the steady state you are looking for… I think that you need to play with the initial conditions and/or the calibration.

Best,
Stéphane.[/quote]

Thanks a lot. I will consider the initial conditions and/or the calibration again.