In model (linear): The following equations had non-zero second derivatives

Stochastic simulations
1

Professor! How to resolve this problem/error ?
MSP_newest.mod (19.3 KB)

2

How sure are you about the pound variables defined at the top section of the model block? If I run your file, Dynare complains because it detects non zero second order derivatives while you declare the model as linear. The error message gives a list of the equations with non linear terms:

ERROR: If the model is declared linear the second derivatives must be equal to zero.
       The following equations had non-zero second derivatives:
       * Eq # 3
       * Eq # 50
       * Eq # 51
       * Eq # 53
       * Eq # 55
       * Eq # 57
       * Eq # 58
       * Eq # 68
       * Eq # 71
       * Eq # 73
       * Eq # 76
       * Eq # 87
       * Eq # 89
       * Eq # 90
       * Eq # 91

If I change the definition of MC_m_ss as:

MC_m_ss = (1/A_m_ss)*((w_r_ss/(1-alpha3))^(1-alpha3))*((r_m_ss/alpha3)^alpha3) ;

replacing w_r by w_r_ss, and run again Dynare, I obtain:

ERROR: If the model is declared linear the second derivatives must be equal to zero.
       The following equations had non-zero second derivatives:
       * Eq # 51

In this equation (banking sector) you have divisions by pi which is an endogenous variable, and the inverse is not linear…

Best,
Stéphane.

3

Thank you so much for your reply, let me cross check…