I tried adding an ingredient department to the NK model, company1 in the mod. Extvalue (s) LARGER than 1 in modulus
for 10 forward-looking variable(s)
The rank condition ISN’T verified!
The model residual is zero. When I deleted the raw material section, the model worked. Is there something wrong with the time in my model? I have tried many times to modify the time of capital, but the problem has not been solved.
ceshi1.mod (2.8 KB)
You need to provide more context. You wrote
but never told us where that part is in your code. As is, your model implies instability. So consider what may cause variables to explode when you add raw materials. Also, if the model works with your capital timing without that part, then the timing of capital should be correct and the problem is with the newly added part.
In my model, producers use labor, capital, and fossil energy to produce products. Fossil energy producers use capital and fossil raw materials to produce fossil energy. The price of fossil materials is given externally. The model residual is zero, but it still reminded me: The rank condition ISN’t verified!
Then you need to think hard about why that part may cause instability. Note that the residuals are meaningless in this case as it is about the dynamics.
Hi, I tried to run a small open economy model with two agents (Ricardian and Non - ricardian) and with two sectors (tradable and non - tradable) and encountered the problem with rank conditions. I read other topics similar to mine but didn’t find a solution. Can someone, help me with this issue?
solve_two_agent_2.mod (14.5 KB)
Sorry, but with a model that size, it’s hard to debug. You should start from a simpler model.
Thank You for Your reply Professor. I did a closed model with two agents and different production sectors, also a small open economy model with one agent and two sectors, but when I tried to somehow mix them I got this model, which doesn’t work.
Can the problem arise from including wrong equation? Or from steady state values, I mean computing steady state not correctly?
See
The steady state is unlikely to be the reason unless there are multiple steady states. After all, your steady state values solve the entered equations. That being said, you are using a linearized model, so the steady state values of the nonlinear model turn up as parameters. Wrong computations here fall under the parameter value issue.