Rank condition is not verified in Dynare

[Aiko]

Hello,

The DSGE model is two agent model with government spending acting as transfers only (simple model). I have looked at other posts about timing error but it does not seem to be the case here. Is there any solution to the problem?

There are 7 eigenvalue(s) larger than 1 in modulus
for 5 forward-looking variable(s)

The rank condition ISN’T verified!

tank3.mod (2.0 KB)
tank3_steadystate.m (1.7 KB)

[jpfeifer]

I see two issues:

1. Your model is explosive. That is often a sign of incorrect parameterization of the fiscal rules that insufficiently stabilize debt.
2. See

Levels versus Growth Rates

You are confusing something. If collinearity arises after using the steady_state operator, what you have done is exactly to remove the capability of the model to determine the steady state of that variable as a function of the parameters. Take again the example of the Fisher equation and steady state inflation. If you exogenously provide the steady state inflation pibar (which cannot be endogenously determined), you can endogenously compute the steady state nominal interest as the product of re…

[Aiko]

Professor,

Thanks a lot for your guidance!

I tried a simplified version of my model excluding the unit root process in debt. So I left with issue N2 as you specified. Following your hint, I modified my files. Unfortunately, I still get the same problem.

There are 6 eigenvalue(s) larger than 1 in modulus
for 5 forward-looking variable(s)

The rank condition ISN’T verified!

Total computing time : 0h00m00s

model_diagnostics(M_, options_, oo_)
MODEL_DIAGNOSTICS: No obvious problems with this mod-file were detected.
tank2.mod (1.8 KB)
tank2_steadystate.m (1.7 KB)

[jpfeifer]

You did not provide the rho_est.data you are loading. Now the problem is less severe. Only one root is still off. Have you tried further simplifying like getting rid of the indexing with respect to inflation?

[Aiko]

Hello,

I apologise for the delay.

I tried to remove the indexation but the result stays the same. Could you please specify why removing indexation should help to resolve the issue?

Do you have other ideas?

Unfortunately rho_est.data cannot be uploaded here.

[jpfeifer]

Anything that simplifies the model makes debugging easier. You don’t know what causes the problem. The usual way of debugging is working from a model that runs and then to add features.