The rank condition ISN'T verified! Problems and Solutions

Stochastic simulations
1

Dear Professor

I run my code and got the problem like this:

There are 8 eigenvalue(s) larger than 1 in modulus
for 8 forward-looking variable(s)

The rank condition ISN’T verified!test2.mod (10.3 KB)

I checked my computation and make sure that nothing goes wrong but I think that probably that the problem might come from the exponential form.

Please let me know what are my problems and how I can fix this. Thank you so so much

2

Please first make sure your model runs and only then use an exp()-substitution. Otherwise, problems are very hard to debug. Please check whether the steady states make sense.