# Taylor rule problem

**URL:** https://forum.dynare.org/t/taylor-rule-problem/28173
**Category:** Stochastic simulations
**Created:** [15 January 2026 11:13 UTC](https://forum.dynare.org/t/taylor-rule-problem/28173 "2026-01-15T11:13:33Z")
**Posts on this page:** 2
**Page:** 1

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### Author: ![JackChou](https://forum.dynare.org/letter_avatar_proxy/v4/letter/j/e47774/32.png) [@JackChou](https://forum.dynare.org/u/JackChou)
#### Post date: [15 January 2026 11:13 UTC](https://forum.dynare.org/t/taylor-rule-problem/28173/1 "2026-01-15T11:13:33Z")

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I have the Taylor rule here ln(R/R0) = rho\_R\*ln(R(-1)/R0) + (1-rho\_R)\*( (phi\_p)\*ln(pi/pi0)+(phi\_y)\*ln(y/y(-1))) + eR;

phi\_y = 0.2;

phi\_p = 1.8;

Run the mod file and turn out: There are 7 eigenvalue(s) larger than 1 in modulus for 6 forward-looking variable(s) The rank condition ISN’T verified!

But if I change the phi\_p = 0.8(\<1) , it runs out without problem.

How should i choose the parameter phi\_p in the Taylor rule?

[fiscalGali1.mod](https://forum.dynare.org/uploads/short-url/rb2HaJMWFMqriP8OocPj3tJLGQO.mod) (4.8 KB)

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### Author: ![jpfeifer](https://forum.dynare.org/user_avatar/forum.dynare.org/jpfeifer/32/5044_2.png) [@jpfeifer](https://forum.dynare.org/u/jpfeifer)
#### Post date: [23 January 2026 14:41 UTC](https://forum.dynare.org/t/taylor-rule-problem/28173/2 "2026-01-23T14:41:31Z")

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This suggests that debt in your model explodes and monetary policy needs to be passive to fund the government.