Dear Professor Pfeifer,

I have a very simple model, with four processes

Blockquote

%%% process

tau_c = rho_c * tau_c(-1) + (1-rho_c) * tau_c_bar + rho_cb *(b(-1) - b_bar) + z_c; %%% 17

tau_w = rho_w * tau_w(-1) + (1-rho_w) * tau_w_bar + rho_wb *(b(-1) - b_bar) + z_w; %%% 18

tau_k = rho_k * tau_k(-1) + (1-rho_k) * tau_k_bar + rho_kb *(b(-1) - b_bar) + z_k; %%% 19

g = rho_g * g(-1) + (1-rho_g) * g_bar - rho_gb *(b(-1) - b_bar)+ rho_gy *(y(-1) - y_bar)+ rho_go *(o(-1) - o_bar) + z_g; %%% 20

the program works well when rho_cb, rho_wb, rho_kb, rho_gb are qual to (for example) x1, x2, etc, but when they have a higher value (or different combinations), I face BK condition error.

I am just asking this question that how these simple processes can change the rank condition? and if this shows an error in my program? and is there any solution?

Looking forward to hearing from you,

Kind regards,

Leo