The rank condition ISN'T verified! Again

Hello, Dynare users!

I’m trying to simulate monetary policy shock in an open economy NK model with financial sector but I constantly receive the following message:

*There are 5 eigenvalue(s) larger than 1 in modulus *
for 9 forward-looking variable(s)

The rank condition ISN’T verified!

Error using print_info (line 45)
Blanchard Kahn conditions are not satisfied: indeterminacy

Error in stoch_simul (line 100)

  • print_info(info, options_.noprint, options_);*

Error in Model_main (line 465)
info = stoch_simul(var_list_);

Error in dynare (line 235)
evalin(‘base’,fname) ;

Does anybody have an idea what might went wrong with my model?

Model_main.mod (9.2 KB)

On the forum and from my experience, this is usually a timing issue or a parameter issue in the model. What worked for me in the past when I could not readily spot it was to simplify the model and add the individual sectors one at a time to see where the problem was coming from. Maybe a little tedious, but you can spot the problem.

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It may have to do with the various bonds in your model, similar to Timing of capital in two sector economy

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Thank you, Professor!

I tried to reduce the model to a closed economy case in order to understand the problem in more tractable way.

Indeed, it appears that the problem was with timing of bonds, deposits and bank’s net worth. After some adjustments, the problem with rank condition disappeared.

However, here’s the thing. When Dynare produces simulations and calculates IRFs I get the following message and fairly weird IRFs:

All endogenous are constant or non stationary, not displaying correlations and auto-correlations

as well as NaNs instead of moments for variables…

Might this issue have anything with parameters or something?

Model_main_closed.mod (6.0 KB)

For now, focus on:

MODEL_DIAGNOSTICS: The following endogenous variables aren't present at the current period in the model:
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