Hello,

I am estimating a SWGK model as proposed by Villa (2016). With its original Taylor rule according to S&W (2007) it is running without any problems, however when I change the Taylor rule according to Garin et al. (2016) the estimation says “Warning: Matrix is singular to working precision.” and “STEADY: No steady state for your model could be found.”.

Could anyone advise, where the problem may be?

```
SWGK TR: rn = rho_r*rn(-1)+(1-rho_r)*(rho_PI*pi+rho_Y*(y-yf))+rho_DY*(y-yf-y(-1)+yf(-1))+eps_r;
Garin TR: rn = rho_r*rn(-1)+(1-rho_r)*(rho_PI*pi+rho_Y*(y-y(-1)))+eps_r;
```

M3_pre2009.mod (9.6 KB)

In Dynare 6.0 a steady state is found. Is your problem during estimation?

Thank you for prompt reply. I am using Dynare version 5.4-ish and the problem occurs after tuning the jscale before RWMH simulation.

That cannot be caused by the Taylor rule itself. Try adding

```
steady_state_model;
dy = trend;
dc = trend;
dfi = trend;
dw = trend;
piobs = picbar;
robs = (1/beta-1)*100;
hobsgm = constelab;
end;
```

Thank you, the steady state is now working properly.

I am, however, obtaining some rather strange things in mode check:

What exactly do you consider strange?

I mean, the red dots do not cause problem to the estimation and its further interpretation?

No, often they just signify the determinacy region of the model. You will get into trouble if your model is just right at the boundary.

I see. Thank you soooo much for your help.