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
-----------
The model does not solve for prior_mean (info = 3: Blanchard & Kahn conditions are not satisfied: no stable equilibrium.)
-----------
Try sampling up to 50 parameter sets from the prior.
-----------
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)