Hi, everyone
I would like to ask for assistance regarding an error encountered while running a Dynare simulation.
As I expanded the model by progressively adding variables and shocks, I recently included price stickiness and monetary policy. After incorporating these features, I encountered the following diagnostic message related to the monetary policy equation:
Collinear equations
49
MODEL_DIAGNOSTICS: The presence of a singularity problem typically indicates that there is one
MODEL_DIAGNOSTICS: redundant equation entered in the model block, while another non-redundant equation
MODEL_DIAGNOSTICS: is missing. The problem often derives from Walras Law.
The problematic equation, labeled as Equation 49, is as follows:
[name=‘49. Monetary policy shock’]
rn = RHO_rnrn(-1)+(1-RHO_rn)(steady_state(rn)+kappa_pi*(Pi-steady_state(Pi))+kappa_y*log(Y/Y(-1)))+eps_r;
Although the simulation runs successfully, the results are not as expected. Since this equation represents the monetary policy rule, I am uncertain how to address the issue. For other equations, I might attempt simplification or restructuring, but this particular case has left me unsure of the appropriate steps.
Could you provide guidance on how to resolve this issue? Any insights would be greatly appreciated.
I really appreciate any help you can provide.
Here is the relevant section of the code I used:
solvess_all_rev.m (1.9 KB)
solvess_rev.m (918 Bytes)
test4.mod (7.5 KB)