Indeterminacy problem

Stochastic simulations
1

Dear Professor

I ran a bond economy model in Dynare and it worked fine. However having switched to a debt economy model, and following changes made to budget constraint and other relevant equations, the model fails to run. It gives me the error

Error using print_info (line 45)
Blanchard Kahn conditions are not satisfied: indeterminacy

When I ran the diagnostic it states MODEL_DIAGNOSTICS: The steady state cannot be computed.

This model does have a steady state so I am abit confused now. Could you please let me know what might be the problem.

Thanks
Azeem
SOEDR7.mod (6.9 KB)

2

No, you only suppressed the steady state check using

steady(nocheck);

But the values you use are not a steady state.

3

I thought when I disable steady state checking, it still computes using the values from steady state model.
Do you mean to say the equations I have listed in steady state model are not correct?
Best
Azeem

4

No, if you disable it, the provided initial values are taken to be the steady state, regardless of whether they satisfy the entered model equations. This means here that the entered model equations and the steady state are inconsistent and at least one of them has a problem.