Dear all,

I am currently working on replicating the model from Heathcote and Perri’s paper “The International Diversification Puzzle is not as bad as you think” (2013) (paper here) in Dynare using the Devereux-Sutherland method.

helpplease.mod (12.1 KB)

I use the standard Normalization (z_bar = 1), and obtain the steady state, however when I try ty simulate the model, the following error message shows up:

dynare helpplease

Configuring Dynare …

[mex] Generalized QZ.

[mex] Sylvester equation solution.

[mex] Kronecker products.

[mex] Sparse kronecker products.

[mex] Local state space iteration (second order).

[mex] Bytecode evaluation.

[mex] k-order perturbation solver.

[mex] k-order solution simulation.

[mex] Quasi Monte-Carlo sequence (Sobol).

[mex] Markov Switching SBVAR.

Using 64-bit preprocessor

Starting Dynare (version 4.5.7).

Starting preprocessing of the model file …

Found 43 equation(s).

Evaluating expressions…done

Computing static model derivatives:

- order 1

Computing dynamic model derivatives: - order 1
- order 2

Processing outputs …

done

Preprocessing completed.

STEADY-STATE RESULTS:

c1 0.514301

c2 0.514301

mc1 1.94439

mc2 1.94439

n1 0.903007

n2 0.903007

mn1 0.903007

mn2 0.903007

k1 9.39791

k2 9.39791

x1 0.140969

x2 0.140969

f1 1

f2 1

y1 0.655269

y2 0.655269

G1 0.655269

G2 0.655269

NFA 0

a1 0.85

a2 0.15

b1 0.15

b2 0.85

qa1 0.655269

qa2 0.655269

qb1 0.655269

qb2 0.655269

ex1 1

tt 1

P1 9.39791

P2 9.39791

d1 0.0949283

d2 0.0949283

w1 0.708743

w2 0.708743

r1 1.0101

r2 1.0101

lambda11 1

lambda12 0

z1 0

z2 0

cd 0

cg 0.514301

Residuals of the static equations:

Equation number 1 : 0

Equation number 2 : 0

Equation number 3 : 0

Equation number 4 : 0

Equation number 5 : 0

Equation number 6 : 0

Equation number 7 : 0

Equation number 8 : 0

Equation number 9 : 0

Equation number 10 : 0

Equation number 11 : 0

Equation number 12 : 0

Equation number 13 : 0

Equation number 14 : 0

Equation number 15 : 0

Equation number 16 : 0

Equation number 17 : 0

Equation number 18 : 0

Equation number 19 : 0

Equation number 20 : 0

Equation number 21 : 0

Equation number 22 : 0

Equation number 23 : 0

Equation number 24 : 0

Equation number 25 : 0

Equation number 26 : 0

Equation number 27 : 0

Equation number 28 : 0

Equation number 29 : 0

Equation number 30 : 0

Equation number 31 : 0

Equation number 32 : 0

Equation number 33 : 0

Equation number 34 : 0

Equation number 35 : 0

Equation number 36 : 0

Equation number 37 : 0

Equation number 38 : 0

Equation number 39 : 0

Equation number 40 : 0

Equation number 41 : 0

Equation number 42 : 0

Equation number 43 : 0

MODEL_DIAGNOSTICS: The Jacobian of the static model is singular

MODEL_DIAGNOSTICS: there is 1 colinear relationships between the variables and the equations

Colinear variables:

c1

c2

mc1

mc2

n1

n2

mn1

mn2

k1

k2

x1

x2

f1

f2

y1

y2

G1

G2

NFA

a1

a2

b1

b2

qa1

qa2

qb1

qb2

ex1

tt

P1

P2

d1

d2

w1

w2

cd

Colinear equations

12

MODEL_DIAGNOSTICS: The singularity seems to be (partly) caused by the presence of a unit root

MODEL_DIAGNOSTICS: as the absolute value of one eigenvalue is in the range of ±1e-6 to 1.

MODEL_DIAGNOSTICS: If the model is actually supposed to feature unit root behavior, such a warning is expected,

MODEL_DIAGNOSTICS: but you should nevertheless check whether there is an additional singularity problem.

MODEL_DIAGNOSTICS: The presence of a singularity problem typically indicates that there is one

MODEL_DIAGNOSTICS: redundant equation entered in the model block, while another non-redundant equation

MODEL_DIAGNOSTICS: is missing. The problem often derives from Walras Law.

Error using print_info (line 42)

Blanchard Kahn conditions are not satisfied: no stable equilibrium

Error in stoch_simul (line 100)

print_info(info, options_.noprint, options_);

Error in helpplease (line 451)

info = stoch_simul(var_list_);

Error in dynare (line 235)

evalin(‘base’,fname) ;

Could someone help me please, what am I doing wrong? Thank you in advance.

Kind regards,

Ivan Cvetkovic