The rank condition ISN'T verified! Help!

Dear Friends

I tried to build a small open economy model with flexible prices but no capital, which has the features of vertical production structure and External debt-elastic Interest Rate (SGU, 2003).

When I run it, it reports ‘There are 3 eigenvalue(S) larger than 1 in modulus for 2 forward-looking variable(s). The rank condition ISN’t verified!’.

By looking up relevant information, I know that it is highly likely to have timing problems, but I cannot know where the timing problems are. I uploaded my mod.

Hopingto get your helps!
Rsimul2.mod (1.8 KB)

When I change the productivity equation, and it works.
log(a) = rholog(a(-1))+e;
was converted to
log(a(+1)) = rho
But I’m still confused.

Hi, frankel.
You did not upload param_r.mat and end.mat.

Hi, Jingjing!
Thank you for response.
Here are two data.
param_r.mat (234 Bytes)
end.mat (330 Bytes)

I recommend checking the timing of all state variables as well as the market clearing conditions associated with these.
I also think your model is weird, such as l1 =(y1h + y1hstar)/a; , your model is similar to Wei and Xie(2020, JIE), you can refer to their paper.

Thank you, Jingjing. I will follow your advice.This model is partly based on their literature.

The fact that changing the timing of a correct equation (TFP) fixes the timing issue, indicates that there is a different equation with a timing problem.

Thanks so much for your guidance,jpfeifer. I’ll check the other equations