Hi, I want to code the present value government budget constraint (fiscal theory with long-term bonds, Cochrane 2001, where debt maturing at time t, B_t-1(t), is equal to the present value of future surpluses) in dynare. In this case, B_t-1(t) is a purely predetermined variable because B_t(t+1) DOES NOT appear anywhere else in the model. Is dynare ok with this? Because I keep getting the following error when I invoke the 3rd order approximation:
[quote]dynare:k_order_perturbation: Caught Kord exception: NaN or Inf asserted in first order derivatives in FirstOrder::solve
Error using mexErrCheck (line 41)
Error encountered in: k_order_perturbation.
Error in k_order_pert (line 40)
Error in stochastic_solvers (line 65)
[dr,info] = k_order_pert(dr,M_,options_,oo_);
Error in resol (line 118)
[dr,info] = stochastic_solvers(dr,check_flag,M,options,oo);
Error in stoch_simul (line 76)
[oo_.dr,info,M_,options_,oo_] = resol(0,M_,options_,oo_);
Error in NonRicardFiscalNKEZSUKRWDisSV (line 1365)
info = stoch_simul(var_list_);
Error in dynare (line 120)
This issue goes away when I use the typical flow government budget constraint instead. Thanks.