Initial Value Problem


I am trying to simulate a shock to the money supply in a new Keynesian model. It is essentially what gali does in chapter 3 of his book. Every time I do this I get the following error;

Error using lnsrch1 (line 53)
Some element of Newton direction isn’t finite. Jacobian maybe
singular or there is a problem with initial values
Error in solve1 (line 129)
Error in dynare_solve (line 130)
bad_cond_flag, varargin{:});
Error in evaluate_steady_state (line 66)
[ys,check] = dynare_solve([M.fname 'static’],…
Error in steady
(line 54)
[steady_state,params,info] =
Error in steady (line 81)
[steady_state,M_.params,info] = steady_(M_,options_,oo_);
Error in econ924_dynare_example (line 188)
Error in dynare (line 120)
evalin(‘base’,fname) ;

has anyone any idea why this might be?
BNKMoney.mod (4.28 KB)


After running the model, type the following command: model_diagnostics(M_,options_,oo_). It gives you the same error as before, plus an additional message:

The following endogenous variables aren’t present at the current period in the model:

Variable “mu” is declared but appears nowhere in the model. However, it is given and initial value for the steady-state. What is it and what does it do? Make sure you solved the model correctly.


Hello, I checked the file and mu shouldn’t have been there, i’ve made a few changes but still get the same message.
Monetary2.mod (4.12 KB)

If you eliminate the variables m and p (and the two associated equations) your model will work