There are 6 eigenvalue(s) larger than 1 in modulus for 5 forward-looking variable(s)

[Nancynn]

Hello everyone!! I used dynare to run the attached code…However, it reported error. I have no idea how to deal with it now. Is there anyone who can help me? Thank u very much!!

There are 6 eigenvalue(s) larger than 1 in modulus
for 5 forward-looking variable(s)
The rank condition ISN’T verified!
错误使用 print_info (line 42)
Blanchard Kahn conditions are not satisfied: no stable equilibrium
出错 stoch_simul (line 98)
print_info(info, options_.noprint, options_);
出错 c48 (line 1058)
info = stoch_simul(var_list_);
出错 dynare (line 180)
evalin(‘base’,fname) ;

_paramc48.mat (5.4 KB)
c48.mod (14.8 KB)
solvec48.m (5.8 KB)
myfunc48.m (4.7 KB)

[jpfeifer]

Your model shows explosiveness. You need to find out why. Most often, it’s a timing issue.

[Nancynn]

Dear Professor,
Thank you for your helpful advice. I checked my model again.
I found a mistake in my model and corrected it , but a new problem emerged. The variables did not converge until after about 20,000 period. price P PH PL looks like straight lines and converge until after about 20,000 period. I couldn’t fix it . I am sorry but could you give me some suggestions or directions to try？

Best regards,

Var Y YH YL C  ph pl    wh wl LAMNR  LAMR CR LR LRH LRL D  CNR LNR LNRH LNRL  LH LL KH KL KP IP  Q RK WH WL PH PL P PI  DX Z BH CEH TCREH TCCEH INH  QU X T G IG KG TRANS tau_cr tau_cnr tau_l tau_k tau_eh tau_el tau_x RR RD RH RL RF F HH HL H HR theta theta2 M AH AL SG SIG Stau_cr Stau_cnr Stau_k Stau_l  Stau_x Stau_eh Stau_el  STRANS ;

Varexo e_H e_L  e_G e_IG   e_tau_cr  e_tau_cnr e_tau_l e_tau_k e_tau_eh e_tau_el e_BH e_M e_RR e_F e_tau_x e_TRANS;
  
Parameters theta2ss ksi rhoF rhoBH s sigma phic phi rho1 rho2 beta delta deltaG  chi epsilon omega omegaR alpha1 alpha2 alpha3 beta1 beta2 epsilon2 epsilon1 d0 d1 d2 rho eta  tau_crss tau_cnrss tau_lss tau_kss tau_ehss  tau_elss  tau_xss QUBAR    phiIGss phiTRANSss TRANSss PHss PLss Pss ALss AHss   RKss Yss YHss KHss LHss WHss WLss Zss CEHss TCREHss YLss KLss IGss KGss LLss  KPss IPss   Xss QUss DXss  Css  CRss  CNRss LRss LNRss LRHss LRLss LNRHss LNRLss Tss Gss LAMNRss LAMRss Qss IHss ILss gammaG gammaIG phiG gammatau_cr gammatau_cnr gammatau_l gammatau_k gammatau_eh gammatau_el gammatau_x gammaR gammaY gammaPI rhoAL rhoAH rhoG rhoIG   rhotau_cr rhotau_cnr rhotau_k rhotau_x rhotau_l rhotau_eh rhotau_el rhoM rhoRR  rhoTRANS gammaTRANS    phiIG  phiTRANS shareKss shareLss INRss INNRss RRss RHss RLss  RDss HHss HLss Hss HRss RFss Fss Mss thetass Dss BHss; 

gammatau_cr = 0.7;
gammatau_cnr = 0.7;
gammatau_k = 0.7;
gammatau_l = 0.7; 
gammatau_eh = 0.7;
gammatau_el = 0.7;
gammatau_x = 0.7;
gammaG = 0.3956; 
gammaIG = 0.3753 ; 
phiG = 0.3208; 
phiIG =0.2529;
phiTRANS=0.3207;
gammaR = 0.718; 
gammaY = 0.1185; 
gammaPI = 1.0473; 
rhoAL=0.9;
rhoAH=0.9;
rhoBH=0.9;

rhoG =0.9;
rhoIG =0.9;
rhoRR =0.9;
rhoM =0.9;
rhoF =0.9;

rhotau_cr= 0.7;
rhotau_cnr= 0.7;
rhotau_k= 0.7;
rhotau_l = 0.7; 
rhotau_eh = 0.7; 
rhotau_el = 0.7; 
rhotau_x=0.9;
rhom=0.9;
rhoTRANS=0.7032;
gammaTRANS = 0.3621;  


load '_paramc48.mat';
set_param_value('sigma',sigma);
set_param_value('phic',phic);
set_param_value('phi',phi);
set_param_value('rho1',rho1);
set_param_value('rho2',rho2);
set_param_value('beta',beta);
set_param_value('delta',delta);
set_param_value('deltaG',deltaG);
set_param_value('chi',chi);
set_param_value('epsilon',epsilon);
set_param_value('omega',omega);
set_param_value('omegaR',omegaR);
set_param_value('beta2',beta2);
set_param_value('beta1',beta1);
set_param_value('alpha3',alpha3);
set_param_value('alpha2',alpha2);
set_param_value('alpha1',alpha1);
set_param_value('epsilon2',epsilon2);
set_param_value('epsilon1',epsilon1);
set_param_value('rho',rho);
set_param_value('eta',eta);
set_param_value('d0',d0);
set_param_value('d1',d1);
set_param_value('d2',d2);
set_param_value('QUBAR',QUBAR);
set_param_value('tau_crss',tau_crss);
set_param_value('tau_cnrss',tau_cnrss);
set_param_value('tau_lss',tau_lss);
set_param_value('tau_kss',tau_kss);
set_param_value('tau_ehss',tau_ehss);
set_param_value('tau_elss',tau_elss);
set_param_value('tau_xss',tau_xss);
set_param_value('phiIGss',phiIGss);
set_param_value('phiTRANSss',phiTRANSss);
set_param_value('TRANSss',TRANSss);
set_param_value('PHss',PHss);
set_param_value('PLss',PLss);
set_param_value('Pss',Pss);
set_param_value('ALss',ALss);
set_param_value('AHss',AHss);
set_param_value('RKss',RKss);
set_param_value('Yss',Yss);
set_param_value('YHss',YHss);
set_param_value('KHss',KHss);
set_param_value('LHss',LHss);
set_param_value('Zss',Zss);
set_param_value('CEHss',CEHss);
set_param_value('TCREHss',TCREHss);
set_param_value('YLss',YLss);
set_param_value('KLss',KLss);
set_param_value('IGss',IGss);
set_param_value('KGss',KGss);
set_param_value('LLss',LLss);
set_param_value('WHss',WHss);
set_param_value('WLss',WLss);
set_param_value('KPss',KPss);
set_param_value('IPss',IPss);
set_param_value('Dss',Dss);
set_param_value('Xss',Xss);
set_param_value('QUss',QUss);
set_param_value('DXss',DXss);
set_param_value('Css',Css);
set_param_value('CNRss',CNRss);
set_param_value('CRss',CRss);
set_param_value('LNRss',LNRss);
set_param_value('LRss',LRss);
set_param_value('LNRHss',LNRHss);
set_param_value('LRHss',LRHss);
set_param_value('LNRLss',LNRLss);
set_param_value('LRLss',LRLss);
set_param_value('Tss',Tss);
set_param_value('Gss',Gss);
set_param_value('LAMRss',LAMRss);
set_param_value('LAMNRss',LAMNRss);
set_param_value('Qss',Qss);
set_param_value('IHss',IHss);
set_param_value('ILss',ILss);
set_param_value('shareKss',shareKss);
set_param_value('shareLss',shareLss);
set_param_value('INRss',INRss);
set_param_value('INNRss',INNRss);
set_param_value('RRss',RRss);
set_param_value('RHss',RHss);
set_param_value('RLss',RLss);
set_param_value('RFss',RFss);
set_param_value('RDss',RDss);
set_param_value('HLss',HLss);
set_param_value('HHss',HHss);
set_param_value('Hss',Hss);
set_param_value('HRss',HRss);
set_param_value('Mss',Mss);
set_param_value('Fss',Fss);
set_param_value('thetass',thetass);
set_param_value('s',s);
set_param_value('ksi',ksi);
set_param_value('BHss',BHss);
set_param_value('theta2ss',theta2ss);



model(linear);
//1-1 CR
LAMR+ P +(tau_crss/(1+tau_crss))*tau_cr=(phic*(1-sigma)-1)*CR+(1-phic)*(1-sigma)*QU(-1);
//1-2 LRH
(phi-rho1)*LR+rho1*LRH=WH+LAMR-(tau_lss*tau_l)/(1-tau_lss);
//1- 3LRL
(phi-rho1)*LR+rho1*LRL=WL+LAMR-(tau_lss*tau_l)/(1-tau_lss);
//1-4 LR
(LRss^(1+rho1))*LR=(LRHss^(1+rho1))*LRH+(LRLss^(1+rho1))*LRL;
//1-5 LAM
LAMR(+1)=LAMR-RD;
//1-6 Q
(Qss/beta)*Q = (1-delta)*Qss*Q(+1)+LAMRss*RKss*(1-tau_kss)*(LAMR(+1)+RK(+1)-(tau_kss/(1-tau_kss))*tau_k(+1));
//1-7 IP
(1+tau_crss)*LAMRss*Pss*(LAMR+P+(tau_crss/(1+tau_crss))*tau_cr)-Qss*Q+chi*Qss*(IP-IP(-1))=chi*beta*Qss*(IP(+1)-IP);
//1-8 KP
KP = (1-delta)*KP(-1) + delta*IP;


//1-9 CNR
LAMNR+ P +(tau_cnrss/(1+tau_cnrss))*tau_cnr=(phic*(1-sigma)-1)*CNR+(1-phic)*(1-sigma)*QU(-1);
//LAMNR(+1)+ P(+1) +(tau_cnrss/(1+tau_cnrss))*tau_cnr(+1)=(phic*(1-sigma)-1)*CNR(+1)+(1-phic)*(1-sigma)*QU;
//1-10 LNRH
(phi-rho2)*LNR+rho2*LNRH=WH+LAMNR-(tau_lss*tau_l)/(1-tau_lss);
//1-11 LNRL
(phi-rho2)*LNR+rho2*LNRL=WL+LAMNR-(tau_lss*tau_l)/(1-tau_lss);
//1-12 LNR
(LNRss^(1+rho2))*LNR=(LNRHss^(1+rho2))*LNRH+(LNRLss^(1+rho2))*LNRL;
//1-13 LAMNR
Pss*CNRss*((P+CNR)*(1+tau_cnrss)+tau_cnrss*tau_cnr) = WHss*LNRHss *((WH+LNRH)*(1-tau_lss)-tau_lss*tau_l)+WLss*LNRLss*((WL+LNRL)*(1-tau_lss)-tau_lss*tau_l)+Pss*TRANSss*(P+TRANS); 
//1-14  C
Css*C = omegaR*CRss*CR + (1-omegaR)*CNRss*CNR;
// 1-15 WH
LHss*LH = omegaR*LRHss*LRH + (1-omegaR)*LNRHss*LNRH;
// 1-16 WL
LLss*LL = omegaR*LRLss*LRL + (1-omegaR)*LNRLss*LNRL;
//1-17  RK
KPss*KP=KHss*KH+KLss*KL;


//2-1 YL demand – PL--18
YL+epsilon*PL=epsilon*P+Y;
//2-2 YH demand –PH--19
YH+epsilon*PH=epsilon*P+Y;
//2-3  P--20
(Pss^(1-epsilon))*P=omega*(PLss^(1-epsilon))*PL+(1-omega)*(PHss^(1-epsilon))*PH;
//2-4 PI---21
PI=P-P(-1);

//2-5 DX 
DXss*DX=d1*Xss*X+2*d2*(Xss^2)*X;
//2-6—
Yss*Y= Css*C + IPss*IP+IGss*IG + Gss*G+(TCREHss/Pss)*(TCREH-P);
//Pss*Yss*(Y+P)= PHss*YHss*(YH+PH)+PLss*YLss*(YL+PL);

//3-1 YL--24
YL=AL+alpha1*KL(-1)+alpha2*LL+alpha3*KG(-1)-(DXss*DX)/(1-DXss);


//3-2 HL 
HLss*HL=WLss*LLss*(WL+LL)+RKss*KLss*(RK+KL(-1));
//3-3 RF
RFss*RF=RLss*RL-Fss*F;

//3-4 trade-off  LL—27
PL-(DXss*DX)/(1-DXss)-(tau_elss*tau_el)/(1-tau_elss)=RF-AL-alpha3*KG(-1)+alpha1*RK+alpha2*WL;
LL-KL(-1)=RK-WL;

//4-1 YH--29 
YH=AH+beta1*KH(-1)+beta2*LH-(DXss*DX)/(1-DXss);
//4-2 HH--30
HHss*HH=WHss*LHss*(WH+LH)+RKss*KHss*(RK+KH(-1));
//4-3 trade-off LH–31

WH-RK=KH(-1)-LH;

(1-tau_ehss)*(1-DXss)*PHss*PH-(1-tau_ehss)*DXss*PHss*DX-tau_ehss*PHss*(1-DXss)*tau_eh-((tau_xss*(1-Zss)*rho*(1-DXss))/BHss)*(tau_x-BH)+((tau_xss*(1-Zss)*rho*DXss)/BHss)*DX+((tau_xss*Zss*rho*(1-DXss))/BHss)*Z-epsilon1*(Zss^epsilon2)*epsilon2*(1-DXss)*Z+epsilon1*(Zss^epsilon2)*DXss*DX=((RHss/AHss)*((RKss/beta1)^beta1)*((WHss/beta2)^beta2))*(RH-AH+beta1*RK+beta2*WH);
//4-5 CEH --33
CEH+BH=YH-(Zss*Z)/(1-Zss);  
//4-6 Z--34
(epsilon2-1)*Z= tau_x -BH;
//4-7-- TCREH-35
TCREH= epsilon2*Z +YH;
//4-8 INH 
INH=CEH-YH;
//4-9TCCEH--37
TCCEH=tau_x+CEH;
//4-10 X--38
Xss*X=(1-eta)*Xss*X(-1)+CEHss*CEH;
//4-11 QU--39
QUss*QU=-Xss*X;
//QUss*QU=(1-eta)*QUss*QU(-1)-CEHss*CEH;
//QUss*QU(+1)=(1-eta)*QUss*QU-CEHss*CEH;



//5-1 
Hss*H=HLss*HL+HHss*HH;
//5-2 
Hss*H=(1-s)*Dss*D+HRss*HR;
//5-3 HR  42
HR=M+HL;
//5-4 RH 43
RHss*RH=thetass*theta;
//5-5 RL 44
//RLss*RL=thetass*theta+RRss*Mss*(RR+M)-Mss*M-thetass*Mss*(theta+M);
RLss*RL=thetass*theta- theta2ss*Mss*(theta2+M);

//5-6 RD
RDss*RD=(1-s)*thetass*theta;
//
RR*RRss=thetass*theta-theta2ss*theta2;


Tss*T = Pss*Gss*(P+G) + Pss*IGss*(P+IG) + +Pss*TRANSss*(P+TRANS)+Fss*HLss*(F+HL);
//6-2  T

Tss*T= omegaR*tau_crss*Pss*CRss*(tau_cr+CR+P)+ tau_crss*Pss*IPss*(tau_cr+P+IP)+ (1-omegaR)*tau_cnrss*Pss*CNRss*(tau_cnr+CNR+P)+ tau_lss*WHss*LHss*(tau_l+WH+LH)+ tau_lss*WLss*LLss*(tau_l+WL+LL)+ tau_kss*RKss*KPss*(tau_k+RK+KP(-1))++tau_ehss*PHss*YHss*(tau_eh+PH+YH)+tau_elss*PLss*YLss*(tau_el+PL+YL)+tau_xss*CEHss*(tau_x+CEH);


//6-3 KG
KG = (1-deltaG)*KG(-1) + deltaG*IG;
//6-4
G = -gammaG*Y(-1) +SG; 
//6-5-
TRANS = -gammaTRANS*Y(-1) +STRANS;
//6-6 IG
IG = -gammaIG*Y(-1) +SIG; 
//5-6- tau_c
tau_cr = gammatau_cr*tau_cr(-1)+Stau_cr; 
tau_cnr = gammatau_cnr*tau_cnr(-1)+Stau_cnr; 
//5-7- tau_l 
tau_l = gammatau_l*tau_l(-1) +Stau_l; 
//5-8- tau_k 
tau_k = gammatau_k*tau_k(-1) +Stau_k; 
//5-9- tau_e 
tau_eh = gammatau_eh*tau_eh(-1) + Stau_eh;
tau_el = gammatau_el*tau_el(-1) + Stau_el;
//5-10 tau_x
tau_x = gammatau_x*tau_x(-1) +Stau_x;
M=rhoM*M(-1)+e_M; 
RR=rhoRR*RR(-1)-e_RR; 
F=rhoF*F(-1)+e_F; 
//6-1 AH
AH = rhoAH*AH(-1)+e_H; 
//6-2 AL
AL = rhoAL*AL(-1)+e_L; 
BH= rhoBH*BH(-1)+e_BH; 
//6-3- SG
SG = rhoG*SG(-1) + e_G;
SIG = rhoIG*SIG(-1) + e_IG;
//6-4 Stau_c
Stau_cr = rhotau_cr*Stau_cr(-1) + e_tau_cr; 
Stau_cnr = rhotau_cnr*Stau_cnr(-1) - e_tau_cnr; 
//6-5- Stau_l
Stau_l = rhotau_l*Stau_l(-1) - e_tau_l; 
//6-6 - Stau_k
Stau_k = rhotau_k*Stau_k(-1) + e_tau_k; 
//6-7- Stau_e
Stau_eh = rhotau_eh*Stau_eh(-1) - e_tau_eh; 
Stau_el = rhotau_el*Stau_el(-1) -e_tau_el; 
//6-8- Stau_x
Stau_x = rhotau_x*Stau_x(-1) + e_tau_x;
//33 - Shock in Transfer of Income 
STRANS = rhoTRANS*STRANS(-1) + e_TRANS; 



ph=PH-P;
pl=PL-P;
wh=WH-P;
wl=WL-P;
end;




resid(1);
steady; 
model_diagnostics;
 
check(qz_zero_threshold=1e-20);
shocks; 
//var e_H; stderr 0.05;
//
var e_L; stderr 0.05;
//var e_BH; stderr 0.05;
//var e_tau_x; stderr 0.1;
//var e_IG; stderr 0.01;
//var e_tau_el; stderr 0.01;
//var e_F; stderr 0.01;
//var e_RR; stderr 0.01;
//var e_M; stderr 0.01;


//var e_G; stderr 0.05；
//var e_TRANS; stderr 0.05;
//var e_tau_cnr; stderr 0.01; 
//var e_tau_l; stderr 0.01;
//var e_tau_k; stderr 0.01;


 end;
stoch_simul(periods=1000,qz_zero_threshold=1e-20,irf=100) 
AH AL Y YH YL P PH PL ph pl wh wl  CR CNR  LH LL LRH LRL KG WH WL IG  IP  KP KH KL  RK X  CEH DX T  F TRANS   ;

[jpfeifer]

It seems your prices have a unit root and are therefore non-stationary. See e.g.

Levels versus Growth Rates

It is well-known that the price level is indeterminate. You can choose any initial level for P and get the same results. A corrolary of this is that the price level has a unit root. While inflation goes back to steady state, this does not apply to the price level. While the IRF will be nice and smooth, it will not return to the initial steady state. Whenever there is a unit root in the model, you will get a collinearity warning in model_diagnostics (which is actually a feature of this model in t…