The model is not Blanchard-Kahn stable

General DSGE Modeling Replication Attempts
1

Hi,

I get the following error when trying to solve my model.

At ./approximation.cweb:111:(252):The model is not Blanchard-Kahn stable
dynare:k_order_perturbation: Caught Kord exception: The model is not Blanchard-Kahn stable
error: k_order_pert was unable to compute the solution

The paper I am trying to replicate is this.

The relevant detrended equations are present on page 22. This error only crops up with certain parameter values. For example, if I keep G_0 at 0.1, it works fine, but if its at 0.14 it spits out this error. Same if the inverse frisch elasticity is too high.

Any help would be greatly appreciated.

Here is the mod file:
model_toloop.mod (1.3 KB)

Thanks

2

Did you exactly use their calibration? I would be surprised if the model is stable for all possible parameter values.

3

Thanks for the reply, Professor

Other parameters are exactly calibrated according to the paper. But I am varying the exogenous govt expenditure parameter to values they test it at (for example cG_0 = 0.18, which is what “high expenditure” is in the figure on page 25).

4

You did not post all the files, so I cannot run the code. So did you try to exactly replicate that figure you mention?

5

caplabtax_paper.zip (3.2 KB)
Dear Professor,

Here is a zip file of the necessary files. ‘AA_runmodel.m’ is the main matlab file which runs through everything.

I couldn’t replicate the figure. I was just trying to get a sense of whether I was headed in the right direction by just playing around with some of the parameters.

6

So you are saying that you are trying to do everything in the paper, but nevertheless you fail in replicating the figures if you follow all the descriptions in the paper?