Problem with the rank condition

[mm101222]

Hello everyone,

I am currently working with a model in Dynare, and I’ve encountered a rank condition issue. Specifically, I have identified 5 eigenvalues with a modulus greater than 1, corresponding to 6 forward-looking variables.

I have already gone through the forum, and the general consensus suggests that such an issue could be related to timing errors or having an unnecessary equation instead of a necessary one.

After carefully reviewing my model multiple times, I am confident that neither of these factors is causing the problem. I have attached my code for reference.

I would greatly appreciate any assistance you can provide to help me resolve this matter.

Thank you in advance for your support!

model.mod (9.2 KB)

[eisamabodian]

My personal experince is timming issue of an endogenous variable is one of the reasons. Check again your model equations in Dynare. In some cases when you enter an equation in Dynare mod file in incorrect Log-Linear form you may have Blanchard-Kahn condition problem.

[jpfeifer]

I agree with @eisamabodian. Sometimes it is a parameter issue. See e.g.

Colinear variable SOE model

It’s recommended to simplify the model for debugging. In your case, it may either be a timing issue or a parameter problem, most likely related to fiscal rules. Have you tried what happens with lump sum taxes? Note that a unit root in the nominal exchange rate may not be a problem.