Something in your model is still missing. The only place `Tx`

and Fr` show up is

```
[name='budget constraint'] //10
Fr+Tx=G +Un*z + chi*gammag*Vg + chi*gammab*Vb;
```

so they are perfect substitutes and indistinguishable.

Something in your model is still missing. The only place `Tx`

and Fr` show up is

```
[name='budget constraint'] //10
Fr+Tx=G +Un*z + chi*gammag*Vg + chi*gammab*Vb;
```

so they are perfect substitutes and indistinguishable.

Happy New Year.

Hope you are doing well. I have changed the model the above mentioned Equation. My policy instruments are Fr and chi. I separated the above equation and not i have

Tx=G +Un*z;
Fr=chi*gammag

And last budget constraint equation is

Y=C+G

But i am still getting error while estimating my model. Previously i was using SS values from my linear model but now i tried with nonlinear model. I am able to find SS values of all variables but problem is SS value of G is so small. Can you please guide me How i can solve this problem.

Error which i am getting is as follows:

Warning: Matrix is close to singular or badly scaled. Results may be inaccurate. RCOND = 9.320566e-37.

after this error model works but af the end i again got this error

**Note: warning(s) encountered in MATLAB/Octave code**

Best

Please provide the updated model-file.

Hello,

Thank you for your reply. please find attached updated file as desired

Updated fille.mod (4.5 KB)

You now have 1 equations less than variables, but specified two instruments.

Hello professor,

Hope you are doing well. I have updated my codes. Now i have 22 variables but 21 equations including one policy instrument i.e. subsidy to the cost of posting vacancy. My codes works but at the end i am getting error

Note: warning(s) encountered in MATLAB/Octave code

and when i check error using model diagnostic i got this error

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

Colinear variables:

chi

Tx

Wg

Wb

Colinear equations

8 10 11 12

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.

I dont understand how there is colinear relationship between variables and equations. I excluded these equations but still there is same error between wage equations and budget constraint. Please guide me where is problem in my model.

updated file is attached here with

updtedfile.mod (4.9 KB)

I will be thankful.

Best

It seems to be a problem that `chi`

is zero in steady state, so approximations to

```
chi*gammag*Vg + chi*gammab*Vb
```

will be singular.

Hello,

Thank you for your response. I edit my equations by excluding firing tax as it is only showing in my budget constraint. I only use subsidy in my model. There is no error in results but i am not getting IRF of all variables for the shock of govt. Spending. why is this so? Also in my results i am not getting multipliers to the policy functions. Is it ok if i am not getting these? For your convenience i am attaching my updated codes for your kind consideration. Please have a look in my results and tell me is there still problem in my model.

I will be thankful to you.

updated.mod (4.6 KB)

Best

Check your steady state. It is more than strange.

Hello,

Hope you are doing well. I am still stuck in my codes. Now My SS values are fine but i am facing this error.

The Jacobian of the static model is singular

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

Colinear variables:

chi

Wg

Wb

Colinear equations

8 11 12

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.

I am adding houshold constraint and government budget constraint. Do i need to combine houshold constraint with resource constraint and then i should use that equation? Please guide me why i am facing this problem.

I am using dynare\4.7-beta2 version which you sent me. Do i need to change my dynare version or this is correct?

Best

Please provide the updated mod-file

updatedmodfile.mod (5.0 KB)

Dear Professor,

Please find attached my updated file. I added houshold budget contraint and government budget constraint. But error is same. chi representing subsidy to the cost of posting vacnacy so it should be on the right hand side of the government budget costraints. I dont know what is reason of getting this error. If i exclude chi from govt. budget constraint then codes dont work and i got this error

The generalized Schur (QZ) decomposition failed. For more information, see the documentation for Lapack function

dgges: info=30, n=6. You can also run model_diagnostics to get more information on what may cause this problem.

Please guide me. I will be thankful

Best

Best

From what I can see, the steady state is not unique. I get a different steady state for pretty much every value for `chi`

, e.g.

```
initval;
chi = 0.2; % Hiring Subsidy
end;
```

Dear Professor,

Thank you for your pormpt reply. You mean there is no problem in my model but the SS is not unique? how i can make it unique? Can you please guide me?

Best

I don’t know your model, but there seems to be a economic mechanism making sure that there is not a unique steady state of the Ramsey problem. I cannot provide additional guidance here, but would suggest you think really hard about the fundamental setup.

Thank you for your reply. My model is similar like Krause and Lubik (2010,2016). Only difference is my household optimization and household budget constraint and i added G in the model. Is it important for ramsey that every equation contain policy instrument? In my model policy instrument appeared in wage equations and in govt. budget constraint. Is that mean that there is problem in my model specification? I already run this model without policy instrument in linearised form. I got results and model was working fine. Why this is not working with Ramsey?

Best

My hunch is that there is a problem in asking the planner to find a unique optimal choice of the instrument. Maybe some of the policy choices resulting from the instrument choice perfectly counteract its effect.

Dar Professor,

Thank you for your reply. You mean there is problem in planner objective? Initally i had two instruments but i was getting error with other instrument (firing tax) therefore i exclude that from the model. Should i include one more instrument in the model?

No, what I am saying is that it seems the Ramsey problem may be ill-defined. Or it’s simply a numerical problem. You can see in your IRFs that `chi`

, `Tx`

, `Wg`

and `Wb`

are in the order of 10^{13}.