Dear Pro. Pfeifer,

I wrote a dynare code about the housing market. I’ve already know which parameter(miu) cause indeterminacy or multiple equilibrium. But the interesting thing is that although the rank condition isn’t verified, the estimation could still work. Could you please explain the reason.

"…EIGENVALUES:

Modulus Real Imaginary

```
0 0 0
7.659e-16 7.659e-16 0
0.4437 0.3961 0.1999
0.4437 0.3961 -0.1999
0.4893 0.4893 0
0.6 0.6 0
0.6 0.6 0
0.6 0.6 0
0.6 0.6 0
0.6 0.6 0
0.6223 0.6223 0
0.9449 0.9445 0.02866
0.9449 0.9445 -0.02866
1.002 -1.002 0
1.011 1.011 0
1.046 1.046 0
1.079 1.079 0
1.581 1.581 0
2.069 2.069 0
3.93 3.93 0
1.333e+16 1.333e+16 0
3.308e+17 -3.308e+17 0
```

There are 9 eigenvalue(s) larger than 1 in modulus

for 8 forward-looking variable(s)

The rank condition ISN’T verified!

Loading 72 observations from china_data.m

Initial value of the log posterior (or likelihood): -909.1994

Gradient norm 23658.2118

Minimum Hessian eigenvalue 0.10647

Maximum Hessian eigenvalue 25801699.2611

Iteration 1

Correct for low angle: 0.000547277

Predicted improvement: 209.449621809

lambda = 1; f = 909.1996753

lambda = 0.33333; f = 909.1993733

lambda = 0.11111; f = 866.9606148

lambda = 0.2148; f = 909.1993606

lambda = 0.14463; f = 857.1288476…"

Here are the attachments including code and data.

Best!

Thank you

Zixiang Zhu

LWZ_Estimation.mod (6.32 KB)

china_data.m (4.14 KB)