Simulation: Problem with baseline New Keynesian Model

Hi there!
I have been trying to simulate monetary shocks on Dynare, but getting the error “Blanchard & Kahn conditions are not satisfied: indeterminacy”, because the rank condition isn’t satisfied. I’m not sure if it’s a problem with the model or with the initial values.
PS: It’s based on Gali’s chapter 3 model, using \alpha = 1. NK.mod (976 Bytes)

Thanks in advance!

Hello, I haven’t the book handy but looking at your file, in Eq7, the rnat(+1) seems strange to me, maybe it is just rnat. Let me know if it works. Best.

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Indeed, the equation mentioned by @fernando is strange, because you usually want to define rnat, not its expected value.
See also

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That was it! Many thanks!

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Perfect! Many thanks! :smiley: