Hello People,

Please help me in getting over this error. I am attaching my mode file.

Thanks!

drive.mod (3.0 KB)

Hello People,

Please help me in getting over this error. I am attaching my mode file.

Thanks!

drive.mod (3.0 KB)

This is the newest vesion. This model is working without taylor rule and euler equation of public bond.

But with Taylor rule, I am unable to figure out the problem.

drive_4.mod (4.2 KB)

I was searching the forum and I found this discussion relevant to me. But I am unable to see what the professor has replied…

Use the Taylor rule

```
(i1/STEADY_STATE(i1)) = ( (i1(-1)/i_ss)^rho_i )*( ( (pi/pi_ss)^phi_pi )*( (Y/STEADY_STATE(Y))^phi_y ) )^(1-rho_i) ;
```

Thank you so much Professor. Now the code runs but the taylor rule is showing collinear with itself.

drive_5.mod (4.1 KB)

Please use the Taylor rule I used. You cannot use the STEADY_STATE operator on all variables as you will run into the problem described at

Dear Professor, Now I am using Taylor rule suggested by you. There were some collinearity issue, so I replaced all prices by inflation terms. But now “Blanchard kahn conditions are not satisfied: Indeterminacy”.

It is so difficult to solve a simple NK model with capital!!

drive_6_try_more.mod (3.8 KB)

The model runs when I make U (capital utilization) predetermined just like capital.

Dear Professor ,

I am attaching the running version of the model. I don’t know why the IRFs are coming exactly opposite: consumption shock decreases inflation and productivity shock increases it!!..

drive_6_try_more_now_working.mod (4.1 KB)

What did you change to make it work?