The rank condition ISN'T verified - Blanchard Kahn condition

Dear all,

I am really getting stuck with the dynare problems now. I will be very pleased if anyone can help with this:

There are 3 eigenvalue(s) larger than 1 in modulus
for 5 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 98)
print_info(info, options_.noprint, options_);

Error in NK_FA2 (line 352)
info = stoch_simul(var_list_);

Error in dynare (line 180)
evalin(‘base’,fname) ;

I am also attaching my .mod file and the paper replicated. I know that these issues have been widely discussed. But, I have spent a few days to solve it, still it does not work.


Financial Accelerator in an estimated New Keynesian Model.pdf (1.9 MB)
NK_FA2.mod (2.8 KB)

I think it is because net worth and capital are state variables and should be entered in dynare accordingly. I lagged both n and k and it ran, alternatively you can assign them as predetermined variables in the mod file.

Thanks so much. I will try it.