Hello everyone,
I have a debt constraint in my model. I am struggling to understand why I have an issue “The rank condition ISN’T verified!” , when I specify the debt constraint in % of current capital stock bbar. If instead the debt in levels everything is all right.
"
There are 2 eigenvalue(s) larger than 1 in modulus
for 2 forward-looking variable(s)
The rank condition is verified."
- Debt in % capital stock C/K(-1)*(PSI/(1-RHO)-1)=bbar+(1+myn)*K/K(-1)
- Debt in levels C/K(-1)*(PSI/(1-RHO)-1)=Bbar/K(-1)+(1+myn)*K/K(-1)