One of the eigenvalues is close to 0/0 (diagnostics okay!)

Dear all.

Running my attached mod file, I get the error “One of the eigenvalues is close to
0/0”. I checked the model diagnostics, which say that “no obvious problem is detected” and I’m quite sure that my steady state is correct. But if I reduce the qz_zero_threshold I get that “BK conditions are not satisfied”. Where can the error be?

Thanks a lot for every hint!
Best regards

bb.mod (4.4 KB)

Usually, there is a timing error involved. Equations like

Y(-1)            = c + K(+1) + B(+1) + L(+1) + r*L;

look strange. Why is output predetermined?

Thanks a lot Prof. Pfeifer! This equation for Y(-1) should reflect the green equation and the selected budget constraint. Output at time t is only available at t+1. But I‘m not sure if I‘ve implemented it correctly.

This one is tricky to implement. So output really is predetermined in that equation. But you need to be careful when you combine equations. Equation (2) is a static one with K and A being predetermined states. Equation (3) cannot be entered this way into Dynare, because there would be expectations around the whole equation in this case.