Hi, in my model PPI represents inflation plus one, in time t-1 there is no price or price=0, so I cannot define inflation for time t (since: PPI=P(t+1)/P(t)) and it starts at time t+1, now my question is if I should set PPI as predetermined variable? And if not, what should I do about this error? …

TSS=0 will imply that T drops from the model.

Predetermined variable t+1

jpfeifer December 15, 2021, 8:31am 4

See

Unit root problem Stochastic simulations

You need to distinguish between a unit root and a singularity problem. Whenever you have a unit root you will get that message about collinearity in model_diagnostics. But that does not always indicate that there is something wrong. If the unit root is a feature of your model (like e.g. in the basic New Keynesian model where the price level has a unit root) then everything is fine. You only have a problem if the unit root should not be there or if the Blanchard-Kahn conditions are not satisfied…

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