Dear all,
I am working with a two-sector model version of Smets and Wouters 2007.
I keep getting the following problem in the estimation.
"The rank condition is verified.
MODEL_DIAGNOSTICS: The Jacobian of the static model is singular
MODEL_DIAGNOSTICS: there is 1 colinear relationships between the variables and the equations
Colinear variables:
p_1
p_2
p_t
Colinear equations
29 30 31
MODEL_DIAGNOSTICS: The singularity seems to be (partly) caused by the presence of a unit root
MODEL_DIAGNOSTICS: as the absolute value of one eigenvalue is in the range of +-1e-6 to 1.
MODEL_DIAGNOSTICS: If the model is actually supposed to feature unit root behavior, such a warning is expected,
MODEL_DIAGNOSTICS: but you should nevertheless check whether there is an additional singularity problem.
MODEL_DIAGNOSTICS: The presence of a singularity problem typically indicates that there is one
MODEL_DIAGNOSTICS: redundant equation entered in the model block, while another non-redundant equation
MODEL_DIAGNOSTICS: is missing. The problem often derives from Walras Law.
======== Identification Analysis ========
Testing prior mean
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The model does not solve for prior_mean (info = 3: Blanchard & Kahn conditions are not satisfied: no stable equilibrium.)
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Try sampling up to 50 parameter sets from the prior.
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Identification stopped:
The model did not solve for any of 50 attempts of random samples from the prior".
Checked up some previous posts but can’t seem to figure it out.
Once the estimation of parameters goes through in the end gives that Blanchard & Kahn conditions are not satisfied: no stable equilibrium.
This problem was not present in previous versions of Matlab such as Matlab 2017 and older versions of dynare.
Any suggestions are welcomed.
Thank you in advance,
SW_model_sticky_2_sector.mod (16.6 KB)
usmodel_data.mat (13.1 KB)