QZ decomposition error in Dynare

[jpfeifer]

Does Ricardian equivalence hold in your model? If yes,

N. of eigenvalues = n. of F-L vars-> rank cond. NOT verified

Hi, I think there are two problems. First, Lambda has the wrong timing. It seems to be an auxiliary variable for the stochastic discount factor. Hence, there should be no (+1). The problem is that it does not appear as a variable in the current period. Second, Ricardian equivalence seems to hold in your model, meaning that lump sum transfers t and bonds b cannot be determined individually. As they are perfectly collinear, this might be the reason for the near singularity warning. What is missing…

would apply.