ModeloConTransfer.mod (5.1 KB)

Hi. I have coded my model with Dynare and it works perfectly. Now I want to extend my model by adding an equation to this model that transforms the interest rate r* from a parameter to an endogenous variable. This way, the interest rate is forced to depend on the savings from the consumer’s budget constraint. It could be any equation, I tried to use the relation r*= savings^kappa, kappa is a constant. I got steady state results. However, I got the following error: Error using print_info (line 51) The Jacobian matrix evaluated at the steady state contains elements that are not real or are infinite.

Also, if I run model_diagnostics(M_,options_,oo_), it says

MODEL_DIAGNOSTICS: The Jacobian of the dynamic model contains imaginary parts. The problem arises from:

Derivative of Equation 21 with respect to Variable sav (initial value of sav: -1.14818)

MODEL_DIAGNOSTICS: The problem most often occurs, because a variable with

MODEL_DIAGNOSTICS: exponent smaller than 1 has been initialized to 0. Taking the derivative

MODEL_DIAGNOSTICS: and evaluating it at the steady state then results in a division by 0.

MODEL_DIAGNOSTICS: If you are using model-local variables (# operator), check their values as well.

Could you advice me how to solve this problem?