Steady state and Colinearity

Stochastic simulations
1

Hello dear user,

I am trying to run a NK-DSGE model. Unfortunately, the model diagnostic tells me that “here is one redundant equation entered in the model block, while another non-redundant equation is missing. The problem often derives from Walras Law”. And the residual of one of my static equation is zero.
When i take a look on my model, i do not see any redundant equation or any one that should be added. So i do not know if there is a way dynare can indicate me where is the colinearity.

I attached my .mod file.

Thanks a lot for your help.

EEE.mod (6.8 KB)

2

Check your timing. For example

k/l=(alpha*w)/((1-alpha)*q);

should probably be

k(-1)/l=(alpha*w)/((1-alpha)*q);
3

Thanks for your quick response.
Sorry not to have updated my .mod file but I have checked all this possible timing problem related to capital but it seems not to be the problem.

4

When I changed the timing of that one equation, the error changed from singularity to indeterminacy. So there is definitely something wrong with your timing. You may have to start with a simpler model.

5

Thanks a lot, I will start there.

6

I have started with a simple that i have been able to run. But once I add my structure, it fails to run. I still think my structure is consistent.

Also, it seems the ability of my model to compute the steady depends on whether or not I solve capital before real wage in steady state. Do you have idea of what should be solved first?

Thanks.

7
  1. Can you exclude that it is a matter of timing?
  2. The steady state is the solution of a simultaneous equilibrium system, so it should not matter in which order you solve it.
8

I am 99% sure that it is not a matter of timing.
Now what i meant earlier was that i can determine real wage with through marginal cost (in this case it will not depend on l) and then determine capital. Or I can first derive capital and after determine real wage (in this case it will depend on l).

Maybe i should attach my equilibrium conditions.

9

Do the two ways of determining the real wage result in the same value?

10

Unfortunately it does not. Once is around 12 and the other is less than 1. But I guess the the first one is more plausible.

11

Then you should try to figure out where the difference comes from. Maybe that will show you where the problem is.