I am building a simple RBC model with Kiyotaki and Moore (1997) type borrowing constraint, and I have a question about Blanchard & Kahn conditions: In my model, there are no error if we drop the borrowing constraint, but the borrowing constraint is same as a good deal of literature, for example, Land‐Price Dynamics and Macroeconomic Fluctuations - Liu - 2013 - Econometrica - Wiley Online Library. And the parameters we use are typical. Then, my question is, why introduce the borrowing constraint will cause this problem and how to solve it?
There are 5 eigenvalue(s) larger than 1 in modulus
for 4 forward-looking variable(s)
The rank condition ISN’T verified!
MODEL_DIAGNOSTICS: No obvious problems with this mod-file were detected.
Error using print_info (line 32)
Blanchard & Kahn conditions are not satisfied: no stable equilibrium.
Error in stoch_simul (line 120)
print_info(info, options_.noprint, options_);
Error in RBC_km.driver (line 251)
[info, oo_, options_, M_] = stoch_simul(M_, options_, oo_, var_list_);
Error in dynare (line 281)
Thanks a lot!