Rank condition ISN'T verified!

Dear Prof. @jpfeifer,

I need your help regarding the Rank condition…I was trying the replicate a working paper (https://privpapers.ssrn.com/sol3/papers.cfm?abstract_id=1249822), all the equations for the benchmark model is on p14.

The replication file is here (
s1.mod (3.5 KB)
). As the paper mentioned, the number of producing firms in period t is an endo. state variable that behaves like physical capital in the standard rbc model. So compared to the equations on p14, I replace all the N_{t+1} with N_{t} in the model block. The file is able to compute the steady-state values but is not able to generate impulse responses.

The error message I got is as follows:

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

The rank condition ISN’T verified!

Error using print_info (line 32)
Blanchard & Kahn conditions are not satisfied: indeterminacy.

Error in stoch_simul (line 107)

  • print_info(info, options_.noprint, options_);*

Error in s1.driver (line 218)
[info, oo_, options_, M_] = stoch_simul(M_, options_, oo_, var_list_);

Error in dynare (line 293)
evalin(‘base’,[fname ‘.driver’]) ;

Thank you in advance!

As written in the paper:

Of these endogenous variables three are predetermined as of time t


s1.mod (3.6 KB)

1 Like

@jpfeifer , many many thanks! Very much appreciated your help!