Simple model - indeterminacy

Stochastic simulations
1

Hi,

I have a very simple Ireland (2004) model. But I am getting indeterminacy. Can anyone please suggest? Attached is the mod file.mpr_mon.mod (1.5 KB)

2

With phipie=0.25; your model does not satisfy the Taylor principle

3

I changed phipie to 2, the error now is

The Jacobian matrix evaluated at the steady state contains elements that are not real or are infinite

4

Now you need to figure out why the steady state cannot be computed.

5

I want to give a negative shock to monetary policy and I did that by putting a negative sign before the shock in the taylor rule equation. But it is producing the results for contractionary monetary policy

log® = phix* log(r(-1)) + phipie*log(pi/piss) - epsmmpr_mon.mod (1.8 KB)

Where am I going wrong?