Problem with Blanchard Khan / timing

Optimal Policy
#1

Hello everyone, I am currently trying to run a Ramsey optimal problem model where the planner controls one instrument. However, I get the following error message:

Blanchard & Kahn conditions are not satisfied: no stable equilibrium.

I am aware that, usually, Blanchard-Khan problems are related to a timing issue, but I face some difficulties in finding the problems with mine. When running the model diagnostic, this is what I get:

MODEL_DIAGNOSTICS: The following endogenous variables aren’t present at the current period in the model:
MULT_26
MULT_28
evaluate_steady_state: The initial values for the steady state of the following variables are NaN:
AUX_EXO_LEAD_954

Do you have any suggestion on how to tackle this problem?

Thank you very much for your help,
Have a nice day!

forum.mod (6.5 KB)

#2

What is v in steady state if I may ask?

#3
  1. Please use Dynare 5.0. The error message in model_diagnostics in older version may not be correct for `Ramsey.
  2. Have you tried whether the issue is one of multiple steady states?
#4

Dear Professor, thank you for the answer.
I am not sure I understand your second point, could you please be more precise?
However, in addition, I’ve found a combination of parameters that seems to work.

@kofiemma Do you mean the value of v at steady state? v is an help for firms and it is set to zero at steady state.

Thank you again,
Have a nice day

#5

We had this same discussion already at

#6

Dear Prof, thanks for the answer and for the reference; I did not understand you were referring to this previous problem, I will check it again.

Thank you,
Have a nice day!