Taylor rule and euler equation collinear

[hucu]

Dynare_file2.mod (11.7 KB)
Hi,

I am trying to solve a DSGE model with central banks digital currency, however the bug is Taylor rule and euler equation collinear with each other, has anyone seen the similar error? I tried replace these with the equations used by Gali but still the same error, may be because of the complexity of the model? Thanks for your support!

[jpfeifer]

You did not provide the external functions to run the code. Most likely the issue is related to:

The generalized Schur (QZ) decomposition failed. For more information, see the documentation for Lapack function dgges: info=15, n=13. You can also run model_diagnostics to get more information on what may cause this problem

An important first step is usually to drop the price level variables (which have a unit root) and then replace them by inflation rates and real variables. Your model currently has a unit root that gives rise to a collinearity warning. It makes debugging harder. In any case, you should try to set up the model without additional features like stock prices or fancy monetary policy. Just get a simple version of the model to run and then add the desired features.

[hucu]

Thank you for your prompt response.
dxi.m (59 Bytes)
xi.m (66 Bytes)
dphi.m (55 Bytes)
phifunc.m (57 Bytes)
psifunc.m (106 Bytes)
du.m (100 Bytes)
dv.m (102 Bytes)
v.m (69 Bytes)
u.m (68 Bytes)
Attached the external functions, please neglect the solve_steadystate one. As Price level appear in multiple equations, I don’t think I can get rid of Price level as a variable. Can you help me review it? Thank you so much!

[jpfeifer]

1. I am pretty sure you can get rid of the price level by only using inflation rates and relative prices.
2. The bigger issue seems to be the timing of the capital stocks that do not conform to Dynare’s timing convention.

[hucu]

Thank you very much! I’ll try